Federal judge sends Cave Rock pollution battle back to state court

RENO -- A legal battle over paying for the clean-up of a gasoline leak from Cave Rock's gas station was sent back to state court on Friday.

U.S. District Judge Howard McKibben ordered the case back to state court during a Friday morning hearing.

Then-owner Robert Hager was ordered to clean up a gasoline spill coming from a leaky tank at the station in 1997. The leak made the news at the time when Nevada Division of Environmental Protection experts found the contaminant in the soil and groundwater below the gas station reaching to lake level.

The station was shut down and Hager ordered to remove the leaking underground tanks.

He applied for money from the State Board to Review Claims, which manages the funds used to help mitigate contamination from leaky underground storage tanks.

The clean up is all but finished and, according to lawyers in the case, cost a total of $1.2 million. But the state board has never ruled on Hager's application.

Three years later, McKibben said that failure concerns him.

"This court believes that anyone who has filed a claim is entitled within a reasonable period of time to have a hearing of that claim and have it decided," he said Friday.

"It seems unfair for these people to have to be on that merry-go-round," McKibben said.

But at the same time, he said most of the issues raised by Hager's lawyer Treva Hearne were the responsibility of the state, not federal, courts to decide. He said Hager has several judicial remedies available at the state level which haven't been used including seeking a writ of mandamus in Douglas County District Court directing the state board to make a decision on Hager's claim.

Hearne filed in federal court accusing the state and the Attorney General's Office of conspiring to cheat Hager out of reimbursement for the clean up. The complaint says that as a result of their actions, Hager was forced to sell the property for much less than it is worth.

State officials describe those allegations as ridiculous, and McKibben said Friday he sees little evidence to support those allegations at this point.

Deputy Attorney General William Fry told the judge Hager's claim was on hold until litigation over whether he was negligent is resolved. Hager is now battling third parties including his first environmental contractor in Douglas District Court over who is financially responsible. The state's suit accusing him of gross negligence and seeking penalties is scheduled for trial in that court in April.

Fry said that litigation will determine who is financially responsible for the cleanup.

Fry told the court the case was complicated by the fact that Hager filed for cash from the joint cleanup fund after being told he had an environmental problem at the Cave Rock site, but then didn't do the work. As a result, Fry said, the state actually contracted and paid for $870,000 of the work.

Hager has reportedly spent about $300,000 of his own money on the project as well.

McKibben said Hager's lawyers should take a writ of mandamus to the state court. He put their federal motion for a restraining order stopping state court proceedings on hold until state remedies were exhausted.

He said because Hager is in federal bankruptcy court over the property and has two ongoing state court suits, he is protected from irreparable harm and no order from his court is needed.

"I think this is primarily a state issue," he said.

McKibben set another hearing in 90 days to see whether the issue was still unresolved.

Hearne said after the hearing they went to federal court because they believe the state board is so biased against Hager at this point that her client can't get a fair decision. She said she would consult with Hager but expected to file for a writ of mandamus with the Douglas County District Court.