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Rhode Island Resource Recovery Corporation v. Restivo Monacelli, LLP

Superior Court of Rhode Island

August 18, 2015

RHODE ISLAND RESOURCE RECOVERY CORPORATION, Plaintiff,
v.
RESTIVO MONACELLI, LLP, Defendant.

PROVIDENCE, SC. SUPERIOR COURT

For Plaintiff: Thomas F. Holt, Esq. Joseph J. Rodio, Esq. Christopher J. Valente, Esq.

For Defendant: Robert C. Shindell, Esq. Derek M. Gillis, Esq. Stephen Adams, Esq.

DECISION

SILVERSTEIN, J.

This matter returns to the Court for decision on Defendant Restivo Monacelli, LLP's (Restivo) Motion for Partial Summary Judgment questioning whether Plaintiff Rhode Island Resource Recovery Corporation (RIRRC) has appropriate standing to file suit against Restivo for its alleged injury stemming from its mandatory funding obligations to maintain certain minimum balances in two trust funds. In its operative Complaint, RIRRC claims investment losses to two trusts-the Central Landfill Remediation Trust Fund (Remediation Trust) and the Closure/Post-Closure Trust Fund (Closure Trust) (collectively, the Trusts)-due to its delayed termination of the Van Liew Trust Company (Van Liew), as fund manager and investment manager, which RIRRC attributes to Restivo's auditing deficiencies in its compliance testing of Van Liew. In a prior Decision from this Court, issued on February 23, 2015[1], the Court found issues of material fact precluded entry of summary judgment with respect to whether Restivo had breached the standard of care owed to RIRRC with respect to these allegations. Now, arguing again for summary judgment, Restivo maintains any claims for damages emanating from the Trusts' underperformance must be brought by the Trusts' trustee, Washington Trust Company (Washington Trust), and not by RIRRC, as the settlor and a beneficiary of the Trusts.

I

Facts and Travel

In light of the Court's lengthy recitation of the facts of this case in its February 23, 2015 Decision, the Court will focus only on those narrow facts related to the formation of the Trusts, the rights of the trustee, and RIRRC's engagement of Van Liew. By way of background, on May 16, 1996, a consent decree was filed in the United States District Court for the District of Rhode Island between the United States of America, on behalf of the Administrator of the United States Environmental Protection Agency (EPA), and the Rhode Island Solid Waste Management Corporation (subsequently renamed RIRRC) (the Consent Decree). See Robert C. Shindell Aff., Ex. B, Apr. 13, 2015. The Consent Decree was entered into by the parties in response to a complaint brought by the EPA against RIRRC based on the condition of the Central Landfill Superfund Site in Johnston, Rhode Island. Pursuant to Section XIV of the Consent Decree and as part of the agreed-upon remediation plan for the site, RIRRC agreed to establish the "Central Landfill Remediation Trust Fund." Among other requirements, the Consent Decree outlined certain monetary obligations of RIRRC, including the condition that RIRRC deposit into the Remediation Trust "any additional sums necessary to bring the balance of the Trust Fund to one million dollars ($1, 000, 000) above the level required to pay [RIRRC's] projected expenses for the following calendar year, as modified, if at all, by EPA." Id., Ex. B at ¶ 55. The Consent Decree further required that "[i]f the $1 million minimum balance is also insufficient to cover the shortfall, [RIRRC] immediately shall take all steps necessary to secure sufficient funding from any and all available sources as set forth in Paragraph 54." Id. at ¶ 55.

The Remediation Trust was officially established upon the execution of the Central Landfill Remediation Trust Fund Agreement (Remediation Trust Agreement) on August 6, 1996 between RIRRC, as settlor (and successor in interest to Rhode Island Solid Waste Management Corporation), and Van Liew, as trustee. The Remediation Trust's express purpose, as set forth in the Remediation Trust Agreement, was to "obtain, hold, invest and disburse funds to be utilized for the payment of certain obligations of the Settlor in connection with the remediation of the Central Landfill Superfund site in Johnston, Rhode Island." (Shindell Aff., Ex. C. at ¶ 2). The Remediation Trust Agreement conferred several powers upon Van Liew, as trustee, including the authority to "hold the Trust Estate and [to] invest and reinvest the Trust Estate solely in accordance with written instructions given from time to time by [RIRRC], which instructions shall be consistent with the then current investment policies of the Board of Commissioners of [RIRRC]." Id. at ¶ 4. Moreover, the trustee has the power to "compromise, adjust and settle claims for or against the Trust Estate[.]" Id. at ¶ 4(e). On January 15, 2008, Washington Trust succeeded Van Liew as trustee of the Remediation Trust in accordance with the provisions of the Remediation Trust Agreement. See Michael J. OConnell Aff., Ex. 1, April 27, 2015.

On March 24, 1998, RIRRC created the Closure Trust in order to comply with Solid Waste Regulation No. 2 for Solid Waste Landfills promulgated by the Rhode Island Department of Environmental Management (DEM) (effective January 1997). The DEM regulations "requir[ed] that an owner or operator of a solid waste management facility . . . provide assurance that funds will be available when needed for closure and/or post-closure care of the facility." See Shindell Aff., Ex. E (Closure Trust Agreement). One possible mechanism delineated in the regulations for RIRRC to "demonstrate financial assurance" that it would meet the requisite costs was the establishment of a trust fund. Id., Ex. D at 87. While the Closure Trust Agreement did not expressly define which entities would be the beneficiaries of the trust, the Closure Trust Agreement did state that the trust was established for the benefit of the State of Rhode Island. Id., Ex. E at § 3. Similar to the Remediation Trust, Van Liew was originally appointed as trustee but was succeeded by Washington Trust on March 29, 2013.[2] See OConnell Aff., Ex. 2. At no point in this litigation has Van Liew (as former trustee of the Trusts) or Washington Trust asserted claims against Restivo. In fact, on April 27, 2015, Washington Trust executed an Assignment of Claims Agreement with RIRRC (the Assignment) transferring to RIRRC all of Washington Trust's "right, title and interest in" the claims RIRRC has against Restivo in the instant litigation. See OConnell Aff., Ex. 3 at 1-2.

As stated by the Court in its February 2015 Decision, in August 2006, RIRRC retained Restivo to provide auditing and accounting services for a term beginning on August 1, 2006 and running through June 30, 2009. See Christopher J. Valente Aff., Ex. B (Agreement between Restivo and RIRRC). Furthermore, the Court stated the following with respect Van Liew:

"Van Liew was retained by RIRRC as its investment manager for [the Trusts] as well as to serve as the pension fund manager for the Money Purchase Pension Plan (Pension Plan). . . . Ultimately, Van Liew was terminated by RIRRC from its roles with the Pension Plan in December 2007 and the [Trusts] in January 2008. According to RIRRC, as set forth in its Second Amended Supplemental Responses to Defendant Restivo's Interrogatory No. 6, Joseph Centofanti (Centofanti), a Certified Public Accountant (CPA) and Forensic Certified Public Accountant (FCPA), is expected to testify regarding Restivo's alleged failures in testing compliance with respect to the management of [the Trusts]. Moreover, RIRRC alleges '[t]esting for compliance with the [] Consent Decree should have included a review of the [Trusts] and the related investment requirements, including those contained in RIRRC's investment policies . . . .' Accordingly, OConnell, through affidavit, opined that '[h]ad Restivo informed me of the scope and nature of Van Liew's departure from RIRRC's investment policy, I would have addressed and ultimately ameliorated this non-compliance sooner, thereby preventing further losses.' . . . DeNigris stated that, based on a series of contested calculations to be discussed below, Van Liew's allegedly improper departure from RIRRC's investment policy resulted in a loss of $2, 551, 052 [to the Trusts]." See Restivo, 2015 WL 851463, at *3-4 (internal citations omitted).

Suit was eventually commenced against Restivo on July 30, 2010. Restivo's present Motion for Partial Summary Judgment was filed on April 13, 2015. Following the hearing on the Motion, as requested by the Court, the parties submitted supplemental memoranda on the narrow issue surrounding the obligations, responsibilities, and powers of the trustee in hopes of determining ...


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