Scrap shredder sues Chicago for reneging on deal to fast-track opening on the heavily polluted Southeast Side

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A clout-heavy scrap dealer is suing the city for more than $100 million, accusing Mayor Lori Lightfoot of reneging on a deal to fast-track a new metals shredder in one of Chicago’s most polluted neighborhoods.

The lawsuit, filed Monday in U.S. District Court, urges a judge to order Lightfoot’s administration to award a permit Ohio-based Reserve Management Group needs to begin chopping up junked automobiles, used appliances and other metallic waste along the Calumet River near 116th Street and Avenue O.

Lightfoot delayed a decision about the permit this month after Michael Regan, the new U.S. Environmental Protection Agency administrator, raised concerns about locating another polluter in a heavily industrialized neighborhood where people already breathe some of the city’s dirtiest air.

RMG’s lawsuit hinges in part on a September 2019 agreement that prompted the company to close its often troubled General Iron shredder on the edge of wealthy, predominantly white Lincoln Park. In return, the city pledged to help clear the way for a new shredder near low-income, mostly Black and Latino neighborhoods on the Southeast Side.

Operating now as Southside Recycling, the company has largely completed construction of its new facility on the ruins of the former Republic Steel mill, where several related businesses operated for years without permits.

“We regret filing this lawsuit, but we are left with no choice to protect our business, employees, suppliers, and customers,” Steve Joseph, RMG’s chief executive, said in a statement. “A business that has spent $80 million to build the most environmentally conscious metal recycling plant in the country must be able to rely on government agencies following their own laws, regulations, and agreements.”

The company’s 28-page complaint includes most of RMG’s responses to community activists who accuse the city of perpetuating environmental racism in neighborhoods scarred by heavy metals and toxic chemicals from current and defunct industries.

Air quality modeling commissioned by RMG determined the proposed shredder would not endanger its neighbors, the company said in its lawsuit, which contends the facility would help protect the environment by keeping scrap metal out of landfills.

The complaint accuses the city of violating RMG’s constitutional rights as a landowner. By refusing to award the city permit, the company’s lawyers argued, the Lightfoot administration “has effectively taken the value of RMG’s property without just compensation.”

City officials also are being squeezed by the EPA and the U.S. Department of Housing and Urban Development. In response to a petition from community groups, HUD launched a civil rights investigation last year focusing on city ordinances that protect industries in certain parts of Chicago without consideration of the health and well-being of people who live nearby.

Federal housing officials have urged the city to withhold RMG’s permit until their probe is completed. Another reason for delay came from Regan, President Joe Biden’s pick to lead the EPA, who suggested a more thorough analysis of the cumulative burden of pollution on the Southeast Side.

In a statement, Lightfoot said her administration “has engaged in a thoughtful, data-driven and robust process that took into consideration the (permit) 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.”

After quietly doing business in Chicago for years, RMG became a target in 2019 when it purchased the General Iron shredder and scrap yard from members of the Labkon family, who had operated near Clybourn and North avenues for most of the previous century.

Pollution problems at the North Side operation led to three legal settlements between the EPA and the Labkons between 1996 and 2018. Neighbors routinely complained about noxious odors and shards of metal drifting into their homes; a city inspector once documented “untreated emissions” escaping from the shredder 11 times during the previous five months.

The Labkons protected their interests by spreading more than $500,000 among local politicians during the past decade. They hired City Hall lobbyists close to the two previous mayors, Richard M. Daley and Rahm Emanuel, as well as Patrick Collins, a former U.S. attorney who led the prosecution of former Gov. George Ryan.

At least one of the family members, Adam Labkon, is part-owner of the Southeast Side operation. Collins is now a registered lobbyist for General III, a limited liability corporation RMG created for the business.

Though General Iron shredded its last car at the end of 2020, its troubles with the EPA aren’t over.

On Tuesday, the agency sent RMG a notice that it violated the federal Clean Air Act by operating the North Side shredder without adequate pollution-control equipment for two months during 2019. The EPA also said RMG failed to apply for a permit it needed to operate legally.

mhawthorne@chicagotribune.com