HOUSTON — In the 1950s, decades before LeRoy Melcher became a well-known real estate tycoon and philanthropist, he opened his first shopping center on San Felipe Road in the River Oaks neighborhood.
It was a modest 12,000 square feet, with a convenience store at one end, and at the other, a shoe repair shop. Tucked in between was a dry cleaner.
Sixty years later, it sits in one of Houston’s most expensive neighborhoods and has become the epicenter of a contentious debate over the enforcement of the state’s environmental laws.
On one side is Harris County, which blames the Melcher family and its tenant, River Oaks Cleaners, for a toxic plume of chemicals detected beneath the property. The plaintiffs are seeking penalties of between $50 and $25,000 per day going back nearly two decades – up to roughly $173 million.
On the other side are Melcher’s heirs, who have refused to settle for anything more than $1. LeRoy Melcher, who died in 1999, and his wife donated millions to charities and the University of Houston, which has three buildings on campus bearing their names.
The legal battle has become a flashpoint for some Republican lawmakers and business leaders in Texas, who think local governments shouldn’t be leading the charge to prosecute the Melchers — or anyone else — over violations of state law. In such cases — including this one — the state must join the case as a plaintiff.
“Is some of this enforcement chasing a rainbow?” state Sen. Paul Bettencourt, R-Houston, asked regulators from the Texas Commission on Environmental Quality (TCEQ) at a legislative hearing last month.
Steve Minick of the powerful Texas Association of Business said in an interview that such lawsuits are “going way overboard.” The state already has remediation programs that work with businesses like dry cleaners and gas stations, he said, so why pile on with litigation?
Responding to concerns from business leaders, state Rep. Charlie Geren, R-Fort Worth, has introduced a bill that would limit civil penalties that local governments can seek under state environmental laws.
But Donald Lee, director of the Texas Conference of Urban Counties, says the state simply doesn't have the resources to make sure pollution laws are enforced far and wide. So it has to rely on local governments to take action.
"Every community in the state has the risk that a good corporate citizen winds up being a superfund site," Lee said. "And every community will need the ability to respond."
Trey Melcher, LeRoy Melcher’s grandson, said the state and county sued before ever notifying the family or the cleaners that they might be responsible for the pollution.
“If they had said, ‘Hey, we did this investigation and we found some problems and we need to work together to fix it,’ we would have done the right thing and cooperated,” Melcher said.
Lisa Wheeler, a spokeswoman with the TCEQ, said recently that the cleaner has no violations on record.
The Melcher family points to a former dry cleaner across the street called Hallmark Cleaners, which settled an environmental lawsuit with the county for $2 million, as the likely source of the contamination.
Nearly four years after being sued, the Melchers are still fighting the legal action, insisting they did nothing wrong.
“I don’t know where the nastiness is coming from,” Melcher said. “But it definitely feels like a shakedown.”
Harris County has brought environmental lawsuits against alleged violators for more than 50 years, said Rock Owens, the county’s managing attorney for environment and infrastructure.
He described them as a last resort for the most egregious offenders and a necessary means to protect the public from polluters, adding that they go forward only with the approval of the county’s commissioners court.
Harris County has four attorneys handling environmental litigation and compliance. They typically bring about four or five cases a year, and settlements generally total about $1 million or less annually. Any lawsuit dealing with state environmental violations — such as the suit against the Melchers — requires the state to join in as a "necessary and indispensable party."
Several high-profile environmental cases in Harris County have resulted in bigger settlements, including a January agreement with AT&T for about $5 million over leaking storage tanks.
And lawyers for the county and the state recently won a $29.2 million settlement from McGinnes Industrial Maintenance Corp. and Houston-based Waste Management Inc. for pollution in the San Jacinto Waste Pits in eastern Harris County. This was another case where the county was the instigator of the suit and Texas joined in because it was over state law.
The remaining defendant in that case, International Paper Co., refused to settle, took its chances with a jury and won. The plaintiffs are asking for a new trial, Owens said.
Of the $29.2 million, the state and county each will get about $10 million, and outside lawyers will get $9 million, he said.
Jacquelyn Young, an environmental advocate who lived near the waste pits for years, said the lawsuits can bring money back into the communities affected by the pollution, but they also send a message.
“It sets an example by letting companies know that it doesn’t matter how big or small they are,” she said. “They will fight to hold them accountable.”
But Minick, of the Texas Association of Business, thinks there’s a different motive.
“They thought Waste Management had a lot of money,” Minick said, adding that he didn't think the state would be involved in such lawsuits if it weren’t for Harris County.
Harris County learned of the pollution along San Felipe Road during a flood control project, Owens said. An investigation led to Hallmark Cleaners, which operated between 1976 and 1997. The soil and groundwater contamination was confirmed in 1996. The state identified a mixture of chemicals in the plume, including the solvent perchloroethylene, or PERC, deemed “a likely human carcinogen” by the EPA.
The Hallmark site was among the first accepted into the state’s dry cleaner remediation program in 2005. The cleaner was razed years ago and replaced with a storage facility.
The state’s monitoring eventually led to the discovery of a second plume below River Oaks Cleaners, Owens said.
In a brief filed with the court in August 2012, then-Attorney General Greg Abbott identified both cleaners as problematic: “It appears each dry cleaning operation is the source of one of the plumes.”
The brief added that the Melchers’ business was not in the remediation program. “Nor has it undertaken any remedial action in connection with the contamination,” wrote Abbott, who is now governor.
William Harmeyer, an attorney for River Oaks Cleaners, said that like the Melchers, his clients maintain the pollution migrated from the Hallmark site.
Owens said the Melchers’ site had been “on the state’s radar for years.” He said the county lacked the legal authority to write citations for violations of state environmental laws.
“All the authority we have is to enforce state law, which means we can file a lawsuit,” Owens said. “That’s it.”
Hallmark settled in November 2012, but the Melchers took the case to a jury trial a year later.
Six days into the trial, the judge declared a mistrial in part because the testimony of a defense witness differed from his deposition.
The judge sanctioned the Melchers, the dry cleaners and their attorneys for improper conduct and violations of the court’s orders.
A new trial is scheduled for this fall.
The county pursued the lawsuit against the Melchers in part because TCEQ lacks the resources to enforce environmental laws on its own, Owens said. The Texas Dry Cleaner Remediation Program has 185 sites statewide with pending cases, according to the TCEQ.
“We have in Texas the illusion of environmental enforcement,” Owens said. “It looks good on paper.”
Wheeler, the TCEQ spokeswoman, referred questions to the state’s Office of the Attorney General, which is representing the state in the lawsuit.
A spokeswoman for the office said she couldn't comment on pending litigation.
Owens said the county would consider any “reasonable offer” to settle the lawsuit.
He described the Melchers as “recalcitrant, to say the least.”
“We’d like them to pay a meaningful fine,” Owens said. “It doesn’t have to be $173 million, but it has to be significant. And we want them in the dry cleaning program where they can clean it up themselves.”
Trey Melcher, 32, said his family feels like it has been targeted unfairly, describing the lawsuit as a form of “extortion.”
“It’s kind of a scary business model that they can go after landowners and businesses thinking that they have assets and looking for money,” he said. “You’re either going to spend years in litigation, or you can settle.”
Editor's note: This story was produced in partnership with the Houston Chronicle.
Disclosure: The Texas Association of Business, AT&T and the University of Houston are corporate sponsors of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.