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Southside Recycling files lawsuit against city of Chicago

The company is seeking a court order mandating issuance of final recycling permit and more than $100 million in damages.

Chicago-based Southside Recycling, which has constructed a scrap recycling facility on the city’s southeast side, has filed a federal lawsuit seeking a court order directing the city of Chicago to issue a final permit to the company. The lawsuit alleges that the city has wrongfully failed to issue the last permit needed for the facility to begin operating, despite acknowledging for months that Southside Recycling has satisfied all the requirements.

According to a news release from Southside Recycling about the lawsuit, the Chicago Department of Public Health (CDPH) large recycling facility permit is the last step in a two-year zoning, rulemaking and state and municipal permitting process. In addition to court orders mandating issuance of the permit and barring the city from interfering with Southside Recycling’s lawful use of its property, the lawsuit requests damages in excess of $100 million from the city.

The company alleges that Southside Recycling and its parent company, Reserve Management Group (RMG) of Stow, Ohio, have met all Chicago’s requirements and guidelines and relied on a September 2019 written contract in which the city promised to “reasonably cooperate with RMG in achieving the efficient and expeditious transition” to the new location, “including reasonable assistance with the processing and review of license and permit applications.”

According to Southside Recycling, RMG relied on the city’s promise in that agreement when it built a new $80 million facility on its 175-acre property located at 11600 S. Burley Ave. RMG also relied on the promises within the agreement with the city in late 2020 it permanently ceased operations at General Iron, its former facility on the city’s north side.

“Since then, however, the city has repeatedly violated the September 2019 agreement as well as its own rules and guidelines, according to the lawsuit,” Southside Recycling states.

Southside Recycling and RMG Investment Group LLC filed the lawsuit in U.S. District Court in Chicago against the city of Chicago and Allison Arwady, commissioner of the Chicago Department of Public Health. The company is seeking a court order directing Arwady to issue the final permit and alleges that the city broke its agreement with RMG and violated the company’s constitutional rights by taking private property without just compensation.

“When we announced this project nearly three years ago, we accepted many business risks, but we knew that we would make the necessary investment to design and build a facility that complies with all city, state and federal standards to protect public health and the environment, and we’ve done that,” says Steve Joseph, CEO of RMG. “But one risk that we did not take was that the city would cast aside its rules and agreement and suspend the permit review, without any legal justification, after we met every requirement. We regret filing this lawsuit, but we are left with no choice to protect our business, employees, suppliers and customers.”

“Throughout its review of this complicated matter, the Chicago Department of Public Health has engaged in a thoughtful, data-driven and robust process that took into consideration the application, supplemental materials, expert reports and studies as well as input from residents who will be most directly impacted by RMG's proposed new use,” Chicago Mayor Lori Lightfoot says in response to the lawsuit. “Given the recent directive from the U.S. Environmental Protection Agency, we must work with them to conduct a further analysis of potential adverse environmental impacts. Because this matter is now being litigated, we will have no further comment.”

The lawsuit alleges that, under Illinois law, if a business satisfies permitting requirements, it is entitled to the permit and a government agency must issue it. The complaint alleges that Southside Recycling “is not part of an environmental justice problem.”

“Recycling obsolete metal contributes to environmental sustainability by reusing resources instead of discarding metal waste in landfills, and it conserves energy and natural resources by reducing the need to mine virgin minerals from the earth,” Southside Recycling says.

According to the company, the city has violated its duty to issue the permit because several community groups and environmental advocates, who have pledged unconditional opposition, “have presented the city a false choice between permitting the new facility and providing environmental justice to the surrounding community,” the lawsuit states. The lawsuit also alleges that there is evidence that the permit delay undermines legitimate concerns the city has over environmental justice and that the delay is resulting in greater allocation of metal recycling and elevated emissions at Chicago’s other shredding facility, Sims Metal Management in Pilsen, Illinois, which Southside Recycling says has no environmental controls on its shredder.

The lawsuit states the city’s agreement with RMG that required the company to close its General Iron facility on the city’s north side by Dec. 31, 2020. In return, the city promised an expeditious permitting process for RMG and Southside Recycling. In June 2020, with the new facility in mind, Southside Recycling reports that the city issued new large recycling facility rules that are regarded as among the most environmentally stringent municipal regulations in the country. Approximately six months later, the city issued guidelines for processing applications for a large recycling facility permit, but it has failed to comply with both the rules and the permit guidelines, as well as the 2019 agreement, the lawsuit alleges.

In late 2020, when the city’s delays made clear that Southside Recycling would not have a permit by year’s end, RMG questioned the necessity of ceasing operations on the north side. When faced with this question, the city responded by threatening to stop the entire permitting process if the north side facility did not close, according to Southside Recycling.

Southside Recycling’s emissions will be monitored continuously, giving the Illinois Environmental Protection Agency (IEPA), Environmental Protection Agency (EPA) and the city each the ability to enforce their applicable health standards. Relying on the IEPA permit and the city’s agreement to expedite its own permitting process and act consistently with its rules, Southside Recycling began construction of the new plant to facilitate an efficient transition and continuity of operations for its customers, suppliers and employees.

In the weeks following Jan. 14 of this year, when Southside Recycling submitted its supplemental permit application in response to the city’s request for more information, the lawsuit states that the city has acknowledged to the company that all its questions were adequately addressed, the application satisfied the large recycling facility rules and that no further information was required. Under the city’s guidelines, CDPH should have issued a draft permit no later than March 15 and a final permit no later than May 15. Southside Recycling reports that the city failed to issue a permit despite repeating the same assurances of a permit between mid-January and late April. The city has failed to honor its promise in the September 2019 agreement to meet at the request of either side.

The lawsuit alleges that because the city has failed to issue the permit to Southside Recycling and has also failed to provide clear and honest messaging about the timing and process, the city has caused significant and potentially permanent damage to Southside Recycling’s business.