WASHINGTON, D.C. – MBK Partnership—an Oregon general partnership of local real estate developers—along with its partners and related business entities (MBK), have entered into a consent decree to resolve a long-running dispute involving homeowners in Klamath Falls, Oregon, the Justice Department and Environmental Protection Agency (EPA) announced today. The settlement was approved today in federal court in Eugene. The dispute involved a lawsuit brought by 13 families of the North Ridge Estates subdivision who alleged that the homes they purchased from MBK were contaminated with asbestos—specifically that the asbestos contamination on the properties was caused by MBK’s improper and illegal disposal of asbestos-containing materials in buildings previously located on the real estate development site. Under the terms of today’s agreement, MBK, its partners, and their insurers will pay approximately $11 million in compensation and litigation costs.
Of the $11 million MBK and other settlers are agreeing to pay in the settlement, the majority will be used to compensate the homeowners and will allow them to relocate to new permanent residences. The remainder of the $11 million will reimburse EPA for the cost of its ongoing investigations. The consent decree also provides for a receiver to hold title to the property and search for a purchaser willing to implement final cleanup measures to be selected by EPA.
“Asbestos contamination is a serious risk to the health and well-being of individuals,” said Sue Ellen Wooldridge, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “Because of this settlement, 17 families most affected by the contamination, including some with small children, will be able to relocate to new homes without fear of further exposure to asbestos.”
“EPA welcomes this settlement,” said EPA Regional Administrator Michael Bogert. “The consent decree allows North Ridge Estates homeowners to relocate to a safer neighborhood, away from any potential exposure to asbestos, and resolves a complicated and protracted dispute.”
MBK was a partnership of local real estate developers Melvin Stewart and Maurice Bercot, and local physician Kenneth Tuttle, who in 1977 purchased the property and buildings of the former Oregon Technical Institute. The buildings were constructed in the mid-1940’s with cement asbestos board siding; asbestos insulation, roofing materials, and floor tiles; buried asbestos-insulated steam pipes; and other asbestos-containing material. Over the course of the next 30 years, the buildings changed hands several times, some of the buildings were demolished, and eventually the property was sold to MBK, which demolished most of the remaining structures with the intention of developing the site for residential homes. The demolition of the remaining buildings generated tons of friable asbestos that MBK and its contractors then spread and buried around the site.
In response to a 1979 administrative order issued by the EPA, MBK removed a portion of the asbestos; however, it failed to deed-restrict the property and buried significant quantities of asbestos throughout the site. The property was subdivided for residential construction in 1993 and advertised as North Ridge Estates. In early 2003, 13 of 22 homeowners filed suit against MBK after the discovery of asbestos contamination on the properties, significantly reducing the property value and subjecting the residents to serious health risks.
The federal consent decree also resolves MBK’s allegation that, as a former owner of the buildings, the federal government was partly responsible, as well as the EPA’s claim that the developers were responsible for costs incurred by EPA in investigating the site, responding to certain releases, and temporarily relocating affected site residents.
The consent decree was negotiated by attorneys in the Justice Department’s Environmental Division and the EPA, under the guidance of U.S. Magistrate Judge Thomas Coffin. The parties also obtained substantial help from financial institutions Fannie Mae, Freddie Mac, U.S. Bank, Wells Fargo Bank, Advantis Credit Union, Washington Mutual Bank, and South Valley Bank & Trust, which provided mortgage loans to the homeowners.