Printer Sues Rival Over Its Pollution : Environment: An Irvine company charges that a competing firm is operating without required safeguards.

In a case that could mark the emergence of a new wave of environmental litigation, an Irvine printing company has filed a federal racketeering lawsuit against one of its competitors, alleging that the firm has gained a competitive advantage by operating in flagrant violation of air pollution laws.

SCS Printing Inc., in a lawsuit filed in U.S. District Court in Santa Ana, charges that Trend Offset Printing Services Inc. of Los Alamitos is operating lithographic printing presses without the required pollution-control equipment and has systematically lied to regulators about the amount of pollutants emitted at its facility.

Although it is common for companies to complain to regulatory authorities that a competitor is violating environmental laws, the lawsuit is believed to be one of the first in which a company has sought to remedy the situation through a private-party court action.

And environmental law experts said such suits may become common as the cost of obeying the law rises and law-abiding businesses become frustrated with the limited enforcement capabilities of regulatory authorities.

“It is very rare for one company to sue another for failure to install pollution control equipment,” said Barry Breen, editor of the Environmental Law Reporter, a Washington-based newsletter. “It’s common for environmental groups to sue companies, and frequently a buyer of land that is contaminated will sue the person who sold it to them, but I’m not aware of another case that fits these facts.”

Speaking generally and not about the SCS lawsuit in particular, attorney Barry Groveman, formerly head of environmental prosecution for the Los Angeles City Attorney’s Office, added: “As the laws get tougher, the issue of even-handed enforcement becomes more and more important. The fact that a company is willing to spend a large amount of money on a lawsuit indicates a failure on the part of the regulatory agencies.”

SCS, also known as South Coast Printing, charges that Trend’s alleged falsification of records and permit applications required by the South Coast Air Quality Management District constitute a violation of the federal Racketeer Influenced and Corrupt Organizations (RICO) statutes. In addition, SCS charges Trend with violations of a state law barring unfair business practices.

Trend, in a countersuit, charges SCS with engaging in unfair competition by “maliciously” interfering with its business relationships. Brooks Iwakiri, chairman of Trend and also owner of Quality Offset in Burbank, said he views the SCS suit as “harassment” by SCS owner Melvin Skolnik aimed at gaining inside information about how Trend operates its business.

“I don’t think he has a leg to stand on,” Iwakiri said.

SCS’s lawsuit said Trend, founded in 1986, had $37 million in sales in 1989, up from $21 million in 1987. Skolnik, who founded a lucrative advertising publication called the South Coast Shopper that was sold to Harte-Hanks Communications in 1986, pegged SCS’s sales for last year at $27 million.

Because printing operations release large amounts of smog-causing volatile organic compounds (VOCs) into the atmosphere, they are heavily regulated by the AQMD. All printing presses must have permits that specify exactly how many pounds of VOCs they can emit, and the afterburners or other devices needed to comply with the rules can cost hundreds of thousands of dollars.

Companies are also required to keep detailed records of the amount of ink used and how the presses are operating so that AQMD regulators can tell if the company is operating in compliance with its permits.

AQMD records show six citations against Trend over the past two years, charging the firm with operating printing equipment without a permit and having “visible emissions.” The AQMD agreed to settle one of the violations early last year for $1,100.

Diana Love, chief prosecutor for the AQMD, said the other violations by Trend were currently pending investigation by her office. AQMD can fine businesses up to $25,000 per day for violations and can also bring criminal charges and seek court injunctions to stop illegal activities. But Love said such severe remedies were employed only in the most egregious cases that threaten public health.

According to the AQMD, there are no outstanding citations against SCS.

SCS, which initially filed the lawsuit in November, 1989, and amended it in April, hired Robert S. Knudsen, a consultant with Price Waterhouse in Newport Beach, to analyze Trend records and supplier invoices obtained as part of the discovery process. According to court filings, Knudsen concluded that between July, 1987, and December, 1989, Trend had purchased far more ink than it reported using and emitted 198 pounds of VOCs per day rather than the 68 pounds allowed by its permits.

Although SCS has not yet made a specific dollar claim for damages, the company said in its complaint that it had “lost existing and prospective customers” to Trend. In a subsequent motion, SCS cited as an example the loss of a contract to print a highly successful Costa Mesa-based real estate publication called Let’s Rent, which had once been its third-largest customer.

SCS further alleges that Trend penetrated the heat-set printing market at a time when it did not have the necessary financial resources to purchase the required pollution control devices. “As such, Trend has gotten a ‘head start’ into the market ahead of its competitors who have complied with the applicable laws and sales,” the suit said.

The RICO statutes, initially devised for use against organized crime, have become a widely used--and highly controversial--tool in a wide variety of business litigation, in part because they call for triple damages. SCS relies on an alleged pattern of mail fraud by Trend in filing false documents with the AQMD as the basis for the RICO violations.

Last week, U.S. District Judge Alicemarie Stotler denied Trend’s motion to dismiss the case, according to SCS attorney Barry Weisz.

The lawsuit states that Trend was formed in 1986 for the purpose of buying the assets of a bankrupt printing company called Lienett Co., which was owned by Robert Lienau and Anthony Lienau. The Lienaus are president and chief executive, respectively, of Trend. They could not be reached for comment.