Kinzua Resources v. DEQ

                                        37

   Submitted on remand from the Oregon Supreme Court December 14, 2020,
affirmed December 7, 2022, petition for review denied May 18, 2023 (

)


                KINZUA RESOURCES, LLC,
             an Oregon limited liability company;
                   Frontier Resources, LLC,
             an Oregon limited liability company;
           ATR Services, Inc., an Oregon corporation;
            and Gregory M. Demers, an individual,
                          Petitioners,
                                v.
                OREGON DEPARTMENT OF
               ENVIRONMENTAL QUALITY,
             an agency of the State of Oregon and
          Oregon Environmental Quality Commission,
               an agency of the State of Oregon,
                         Respondents.
             Environmental Quality Commission
                   LQSWER11108; A161527
                                   

     In this administrative review on remand from the Oregon Supreme Court,
petitioners contend that the Environmental Quality Commission’s order was not
supported by substantial evidence. According to petitioners, under the construc-
tion of the relevant statutes announced by the Supreme Court, there was no evi-
dence that two corporate entities had legal control over petitioner Kinzua as to
impose direct liability on the company’s members for failure to comply with those
statutes. Held: The commission found that petitioner Kinzua was a limited liabil-
ity company managed by its two members. Under the relevant LLC statutes, each
member had equal rights in the management and conduct of petitioner Kinzua.
Under the Supreme Court’s construction of the solid waste management statutes
at issue in this review, those facts were sufficient to impose direct liability for
petitioner Kinzua’s failure to properly close a landfill or secure required financial
assurances. Thus, the commission’s order was supported by substantial evidence.
    Affirmed.


   On remand from the Oregon Supreme Court, Kinzua
Resources, LLC v. Oregon Department of Environmental
Quality, 

, 

 (2020).
   Julie A. Weis argued the cause for petitioners. Also on
the opening brief were Michael E. Haglund and Sara
Ghafouri. On the reply brief were Julie A. Weis and Michael
E. Haglund.
38                                Kinzua Resources v. DEQ

   Denise G. Fjordbeck, Assistant Attorney General, argued
the cause for respondents. Also on the brief were Ellen F.
Rosenblum, Attorney General, and Benjamin Gutman,
Solicitor General.
  Before Mooney, Presiding Judge, and Pagán, Judge, and
DeHoog, Judge pro tempore.
     PAGÁN, J.
     Affirmed.
     DeHoog, J. pro tempore, dissenting and concurring.
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            PAGÁN, J.
         This matter comes to us on remand from the
Supreme Court, Kinzua Resources v. DEQ, 

, 

 (2020) (Kinzua III), to address an argument by peti-
tioners Demers, ATR Services, Inc., and Frontier Resources,
LLC, that was not addressed in our previous opinion, Kinzua
Resources v. DEQ, 

, 

 (2018)
(Kinzua I), adh’d to on recons, 

, 

 (2019) (Kinzua II). After applying Kinzua III’s frame-
work and interpretation of ORS 459.205 and ORS 459.268,
we conclude that the commission’s decision to impose fines
against petitioners was supported by substantial evidence,
and we therefore affirm.
         As this matter has been presented to Oregon’s appel-
late courts multiple times, a recitation of the full procedural
and factual background of this Environmental Quality
Commission (the commission) proceeding would be redun-
dant. Relevant to this particular remand are the following
undisputed facts: Kinzua Resources, LLC, owned the Pilot
Rock Landfill site. In 2006, Kinzua obtained a required
permit for the site from the Department of Environmental
Quality (DEQ) to operate the site as a disposal site for an
adjacent sawmill. That permit required Kinzua to obtain
financial assurance, particularly for the costs of closing the
site and maintenance of the site after closure. Kinzua failed
to acquire the financial assurance, resulting in a Notice of
Civil Penalty by DEQ in 2010.1 The resulting final order of
penalty included a fine of $25,075, as well as an order that
Kinzua secure financial assurance in accord with the rel-
evant regulations. Kinzua never complied with the order
regarding financial assurance.
          In 2013, DEQ found that Kinzua had still not com-
plied with its responsibilities, this time regarding how it
closed the site and the post-closure maintenance. As a result,
DEQ issued the amended notice of civil penalty at issue in
this remand. In response, petitioner Demers, an individual,
communicated with DEQ on behalf of Kinzua. Most notable
for this remand, Kinzua was, at all relevant times, managed

   1
       Kinzua did not challenge the penalty and it is not at issue in this opinion.
40                                              Kinzua Resources v. DEQ

by two entities: ATR and Frontier. ATR and Frontier were
the only members of Kinzua, a limited liability company
(LLC). In its Restated Articles of Organization, Kinzua
elected to be managed by its members. Under ORS 63.130(1),
each member therefore had equal voting rights and power in
the LLC. Demers, an individual, was a member of Frontier
and also a shareholder and the president of ATR. Thus, at
the time that DEQ was communicating with Kinzua about
its conduct, Kinzua, as an LLC, had arranged to be “con-
trolled” by the two voting members that were also separate
legal entities, ATR and Frontier, while having Demers rep-
resent to DEQ and other entities that he spoke on Kinzua’s
behalf and was an agent of Kinzua or Frontier and ATR.
         After an administrative hearing on the proposed
penalty and order to comply, this matter proceeded to a
contested hearing before the commission. The commis-
sion found that Kinzua: (1) violated ORS 459.268 when it
failed to close the landfill; (2) violated OAR 340-095-0090
when it failed to obtain sufficient financial assurance; and
(3) violated OAR 340-095-0050(1) when it failed to apply
for a “closure permit.” The commission assessed a penalty
of $782,862 against Kinzua, most of which represented the
economic gain Kinzua obtained by avoiding the costs of
properly closing the site.2
         However, DEQ assigned liability beyond Kinzua
itself to include ATR, Frontier, and Demers under ORS
459.268 and ORS 459.205. ORS 459.268 states:
         “When solid waste is no longer received at a land dis-
     posal site, the person who holds or last held the permit
     issued under ORS 459.205 or, if the person who holds or last
     held the permit fails to comply with this section, the person
     owning or controlling the property on which the disposal site
     is located, shall close and maintain the site according to the
     requirements of this chapter, any applicable rule adopted
     by the Environmental Quality Commission under ORS
     459.045 and any requirement imposed by the Department
     of Environmental Quality as a condition to renewing or
     issuing a disposal site permit.”
(Emphasis added.) ORS 459.205 states:
     2
         Petitioners have not assigned error to the findings against Kinzua.
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       “(1) Except as provided by ORS 459.215, a disposal
   site shall not be established, operated, maintained or sub-
   stantially altered, expanded or improved, and a change
   shall not be made in the method or type of disposal at a
   disposal site, until the person owning or controlling the dis-
   posal site obtains a permit therefor from the Department of
   Environmental Quality as provided in ORS 459.235.

       “(2) The person who holds or last held the permit
   issued under subsection (1) of this section, or, if that person
   fails to comply, then the person owning or controlling a land
   disposal site that is closed and no longer receiving solid
   waste must continue or renew the permit required under
   subsection (1) of this section after the site is closed for the
   duration of the period in which the department continues
   to actively supervise the site, even though solid waste is no
   longer received at the site.”

(Emphases added.)
          In arguing against the civil penalties, petitioners
contended that the commission could not hold anyone other
than Kinzua liable for any violations related to closing the
site under ORS 459.268 or ORS 459.205 without a finding
that the person or entity managed the day-to-day operations
of the site. That argument rested on a narrow reading of the
word “controlling” to mean more than having legal authority
over the site. The commission disagreed, interpreting ORS
459.268 and ORS 459.205 to support finding that those who
control the site, legally, as well as practically, can be held
liable. As laid out by the Supreme Court:
       “[T]he commission concluded that Frontier, ATR, and
   Demers were responsible for the same violations [as Kinzua]
   as persons ‘controlling’ the landfill, and it assessed a civil
   penalty against them ‘in the same amount and manner as
   Kinzua Resources LLC.’ The commission reasoned that
   ‘controlling’ includes having authority to control and found
   that all three petitioners met that test. With respect to
   Demers, the commission found that he ‘had actual control
   of matters relating to the landfill site and that he exercised
   that control.’ With respect to ATR and Frontier, the com-
   mission found that they had the authority, as the members
   of Kinzua, ‘to control the property of the company, includ-
   ing the landfill.’ ”
42                                       Kinzua Resources v. DEQ

Kinzua III, 

. The commission stated, regarding
ATR and Frontier:
        “It is also undisputed that Kinzua is a limited liability
     company whose members are ATR Services and Frontier
     Resources. Further, it is undisputed that Kinzua is [a]
     member managed limited liability company and that ATR
     Services and Frontier Resources have the legal authority
     to manage and conduct the limited liabilities business,
     and thus to control the properties owned by Kinzua. ORS
     63.130.”
          Notable are the commission’s findings that Demers
provided contradictory testimony about his role with Kinzua,
for example, stating in one instance that he was its presi-
dent and secretary, and in the next saying he had no role
whatsoever with the company. The commission concluded
that Demers had operational control of the site, and that he
was “delegated to go deal” with DEQ when the notices were
first issued.
         Rejecting petitioners’ arguments about the applica-
tion of the statutes, the commission concluded:
        “That DEQ did not present any evidence that ATR
     Services and Frontier Resources actually exercised their
     legal control over the operations of the landfill, is not deter-
     minative of whether they had control over the landfill. ATR
     Services and Frontier Resource[s] had control * * * over the
     operations of the landfill as a matter of law, irrespective of
     whether they exercised that control. Moreover, this appears
     to be the very type of situation that the statutes were
     intended to address in order to assure that those entities
     with authority to exercise control do so when a permittee
     has failed to comply with the requirements of the permit
     and underlying statutes and rules. As members of Kinzua
     Resources, LLC, with control over the landfill[,] ATR
     Service[s] and Frontier Resources took advantage of the
     opportunity to benefit from the operation of the landfill[.]
         “The legal situation with respect to Mr. Demers is dif-
     ferent. Mr. Demers was not a member of the Kinzua lim-
     ited liability company and thus did not have legal authority
     on that basis to control the landfill. * * * [T]here is clear
     and convincing evidence in the record that Mr. Demers had
     been authorized on behalf of Kinzua by the members of the
     company and that he actually exercised that authority.”
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        Petitioners appealed, and their various assign-
ments of error to the two appellate courts are relevant to
the particulars of this remand.
         Before us, petitioners raised two assignments of
error: first, that the commission erred by construing the
term “control” in ORS 459.205 and ORS 459.268 to include
Demers; and second, that the commission erred by con-
struing “control” as previously noted to include Frontier
and ATR “simply because they had authority to control the
landfill by virtue of being LLC members even though they
never exercised such control.” We were persuaded by the
petitioners’ arguments regarding control, stating: “the best
reading of [the two statutes] is that the term ‘controlling’
is directed at those persons actively involved in the opera-
tion or management of a landfill site; in other words, those
who, after a permit holder fails to comply with its obliga-
tions under a landfill permit regarding a particular site,
step in and exercise restraining or directing influence over
that site.” Kinzua I, 

. We adhered to
our decision on reconsideration, but clarified that Demers’s
argument was limited to whether his conduct would be con-
sidered “controlling” if it was not shown that he exercised
day-to-day operational control of the site. Kinzua II, 

.
         DEQ sought review of our decision, presenting only
one argument to the Supreme Court on review: The term
“controlling” in ORS 459.205 and ORS 459.268 should
be interpreted to mean “having authority over the prop-
erty on which a land disposal site is located, regardless of
whether that authority is actually exercised.” In opposition,
petitioners argued that DEQ’s proposed reading of the
statutes would conflict with ORS 63.165(1), which provides
members of limited liability companies with protection from
liability for the obligations of the company. Further, peti-
tioners argued that we had correctly interpreted the
term “controlling” in the statutes. In reply, DEQ argued
that Demers was, in fact, legally in control of all the enti-
ties involved in the litigation in one way or another, but,
“[u]ltimately, where the decision-making authority lies in
this web of interrelated entities is a factual determination
for the Court of Appeals to make on remand.”
44                                      Kinzua Resources v. DEQ

          The Supreme Court reversed, concluding that our
reading of the word “controlling” was too narrow, particu-
larly in the context of the phrase “owning or controlling.”
Kinzua III, 

. “Here, giving the term ‘owning’
its ordinary meaning, the statutory obligation arises from
a person’s status—possessing legal authority over the land
on which the landfill is located—without regard for whether
the person has actively participated in the operation of the
landfill.” 

 After analyzing the text, context, and legisla-
tive history of the statutes, the Supreme Court concluded
that the legislature intended to hold those with legal author-
ity over a site liable for the statutory obligations related to
the site, regardless of whether or not DEQ could provide
evidence that the person or entity actually exercised that
authority. 

. The court reasoned that the legisla-
ture intended, as is the case here, to hold liable entities that
could direct a site to comply with regulatory and statutory
requirements but fail to do so. 

 (“That purpose of assur-
ing public protection when the permit-holder fails to act is
more compatible with the commission’s conclusion that ‘per-
sons * * * controlling’ the disposal site reaches those having
authority to take the actions required for proper closure.
If those closure obligations fell only to persons owning or
‘actively exercising’ control over the landfill operations, it
is more likely that critical post-closure maintenance would
be left as a problem for the state to correct, as this case
illustrates.”).
       Perhaps referring to DEQ’s argument about this
court making a factual determination on remand, the
Supreme Court stated:
        “Whether the liability that the commission imposed on
     petitioners is direct liability for petitioners’ own omissions
     as persons ‘controlling’ the disposal site is intertwined
     with an alternative argument that petitioners raised in
     the Court of Appeals—that the record lacks substantial
     evidence to support the commission’s findings, even under
     the commission’s construction of ‘controlling.’ The Court of
     Appeals did not reach that argument, and neither party
     has meaningfully addressed petitioner’s evidentiary chal-
     lenge in light of the statutory framework that we have
     articulated in this opinion. Under the circumstances, we
     conclude that it is appropriate to remand this case to the
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   Court of Appeals to consider petitioners’ remaining chal-
   lenges to the order in light of the legal standard that we
   have identified.”
Id. at 689 (footnote omitted).
       We are thus left to consider whether any of petitioners’
remaining arguments can escape the conclusion of the
Supreme Court in Kinzua III.
         Looking first at ATR and Frontier, the Supreme
Court ordered that we consider the secondary argument
that the commission’s findings were not supported by sub-
stantial evidence in the record, given the conclusion that
the commission correctly interpreted the statutes. A close
reading of the record below and the briefing by petitioners
demonstrates that petitioners’ arguments regarding ATR
and Frontier required us to disagree with the commission’s
conclusions. That is, at no point did petitioners argue to us
that the record failed to demonstrate that ATR or Frontier
lacked “legal authority” over the site; the arguments were
premised on the view that, although the record demon-
strated legal authority, that was insufficient to show “con-
trol” under the statutes. However, those arguments are fore-
closed by the conclusion in Kinzua III.
         To begin, the question presented by petitioners
assumed that ATR and Frontier had legal authority to
control the site but did not exercise that authority. In peti-
tioners’ opening brief, they framed the second assignment
of error as:
      “Did the Commission err by exceeding the scope of
   authority granted by the legislature when it construed
   the term ‘control’ in ORS 459.205 and 459.268 to include
   Frontier and ATR, the LLC members of the permittee/
   owner of the landfill, simply because they had authority to
   control the landfill by virtue of being LLC members even
   though they never exercised such control?”
(Emphasis added.)
        Further, regarding whether the commission’s con-
clusion was supported by substantial evidence, petitioners
necessarily relied on the argument that DEQ was required
to demonstrate that “ATR or Frontier actively participated
46                                            Kinzua Resources v. DEQ

in the operations of the landfill.” Petitioners argued that “the
ability to control Kinzua cannot be equated with control over
the landfill.” Because we are bound by Kinzua III, any argu-
ment that requires DEQ to demonstrate something more
than legal authority would necessarily fail on the facts of
this case.3 Looking at Kinzua III and its focus on the context
of the phrase “controlling,” we cannot escape the importance
of the word “owning.” For the same reason that we would
reject an argument that the statutes would not apply if there
were multiple owners of a site, we reject the argument that if
there are multiple entities or persons who have legal author-
ity over a site, none can be held liable without a factual
demonstration of something more than that legal authority.

          Moreover, even if we do not treat the logical predi-
cates of control implicit in petitioner’s appellate arguments
as concessions sufficient to meet the Supreme Court’s formu-
lation of the statutes announced in Kinzua III, there is ample
reason in the record to conclude that the commission’s order
was based on substantial evidence. The commission explic-
itly determined that Kinzua had two members—Frontier
and ATR. And as ORS 63.130(1) provides, absent some other
arrangement provided in the articles of organization or
operating agreement, each member “has equal rights in the
management and conduct of the limited liability company’s
business.” There is nothing in the record that indicates any
other arrangement than the default of ORS 63.130(1). As
we understand Kinzua III, the combination of those two—
membership in an LLC and “rights in the management and
conduct” of the business—is sufficient to conclude that legal
control existed in Frontier and ATR to impose direct lia-
bility for each entity’s omissions with respect to the permit
and financial assurances. In other words, the commission’s

    3
      The dissent argues that “coequal” legal control is insufficient under
Kinzua III’s analysis because one member cannot cause the organization to
act without the consent of the other. 323 Or App at 55 (DeHoog, J., dissenting).
However, that argument ignores that failing to act—that is, failing to provide
consent to one’s co-equal partner—has the same legal and practical effect as hav-
ing exercised actual authority. If the LLC requires both members to agree on a
course of action before it can be taken, refusing to consent necessarily paralyzes
the organization, and authority has, in fact, been exercised. As discussed further
below, this is precisely the type of legal authority the legislature sought to hold
accountable under ORS 459.268 and ORS 459.205.
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order was supported by substantial evidence of the required
facts.
         Kinzua III makes clear that the legislature intended
that DEQ could hold someone liable for the failings of operat-
ing and closing a landfill without having to engage in a shell
game with management and operational control. Indeed,
as the Supreme Court noted, it is precisely situations like
this that the legislature wanted to avoid: a business entity
failing to act and claiming that no one could be held lia-
ble because “no one acted.” Kinzua’s owners were seemingly
protected by a layer of corporate entities. After Kinzua
failed to properly close the site or post financial assurances,
it lapsed into administrative dissolution with the Secretary
of State for “failure to pay certain filing fees or file required
annual filings.” 4 If petitioners’ arguments were accepted, a
once defunct entity that petitioners would like the world to
believe is not controlled by anyone would be the only entity
held liable for its failings. We are thus left with two entities
that petitioners repeatedly acknowledged, and the record
clearly demonstrated, had legal authority over the site but
did not act. Under Kinzua III’s framework, those entities
may be held liable.
         Turning then to Demers, the Supreme Court noted,
in a footnote, that Demers also made an argument that he
could not be held liable because he was only an agent of ATR
and Frontier. The Supreme Court declined to address the
argument, as it was raised for the first instance in the reply
brief to us. Kinzua III, 

 n 10. However, the
Supreme Court also noted that, to the extent the argument
was premised on there not being substantial evidence to
support finding that ATR and Frontier “controlled” the site
under ORS 459.205 and ORS 459.268, such an argument
could be considered on remand. Because we conclude that
there was substantial evidence to support the commission’s
finding regarding ATR and Frontier, we decline to discuss
the agency argument Demers raised for the first time in the
reply briefing.
         Affirmed.

     4
       Kinzua was later reinstated within the prescribed statutory time to allow it
to resume business activities “as if the administrative dissolution never occurred.”
48                                      Kinzua Resources v. DEQ

        DeHOOG, Judge pro tempore, dissenting and
concurring.
         In reversing our decision in this case, the Supreme
Court directed us to undertake two tasks on remand: First,
consider petitioners’ argument that, even if petitioners ATR
and Frontier theoretically could be held liable based upon
their authority to control the landfill site, “the record is
‘devoid of any evidence that [either entity], acting alone, had
the authority to direct Kinzua’s management or conduct’ ”;
and second, “[t]o the extent [that] petitioners’ argument
[regarding petitioner Demers’s liability] assumes that ATR
and Frontier * * * were not persons ‘controlling’ the landfill,”
consider that challenge as well. Kinzua Resources v. DEQ,

, 689 & n 10, 

 (2020) (Kinzua III)
(stating that, if petitioners’ argument made that assump-
tion, their “challenge as to Demers [would be] within the
scope of * * * remand”). As to the first of those issues, the
Supreme Court observed:
     “Some aspects of the order suggest that the commission
     treated the collective authority of the LLC members to con-
     trol Kinzua as if each individual member had full authority
     to control Kinzua’s property (the disposal site). The com-
     mission has insisted, however, that its finding that ATR and
     Frontier were persons controlling the landfill site relied on
     more than just their status as apparently co-equal members
     of Kinzua.”

 (emphasis added). In leaving that “final dispute” for us
to address in the first instance on remand, the court further
explained:
     “Whether the liability that the commission imposed on
     petitioners is direct liability for petitioners’ own omissions
     as persons ‘controlling’ the disposal site is intertwined
     with an alternative argument that petitioners raised in the
     Court of Appeals—that the record lacks substantial evi-
     dence to support the commission’s findings, even under the
     commission’s construction of ‘controlling.’ ”

 (emphasis added).
         As I understand the majority opinion’s approach to
the first issue, it appears to largely reason that—notwith-
standing the Supreme Court’s express directive that we
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address petitioners’ argument that the commission errone-
ously treated the collective authority of the LLC members as
full authority for purposes of the applicable statutes—that
matter is essentially unpreserved on appeal. See 323 Or App
at 45 (“At no point did petitioners argue to us that the record
failed to demonstrate that ATR or Frontier lacked ‘legal
authority’ over the site.”). As to petitioners’ “intertwined”
substantial-evidence argument, the majority reasons that
any such argument is rooted in petitioners’ failed position
that the commission could not hold any person liable who
had not actively participated in landfill operations. See id.
at 45-46. Thus, the majority seems to conclude, Kinzua III
largely forecloses the substantial-evidence argument that
that same opinion directed us to consider. See id. at 45-47;
see also Kinzua III, 

 (directing that inquiry
on remand). Finally, despite having reached the foregoing
conclusions, the majority briefly considers whether the com-
mission’s final order is supported by substantial evidence
and concludes that it is. 323 Or App at 46-47.1
         In my view, the majority opinion inadequately
engages with the Supreme Court’s explicit remand instruc-
tions in Kinzua III. Moreover, for the reasons that follow, I
would conclude that petitioners have the better argument
as to the first issue and that, ultimately, the commission’s
final order is not supported by substantial evidence and rea-
son. As a result, I respectfully dissent with regard to those
matters.
                                DISCUSSION
         Given the Supreme Court’s explicit instructions, I
understand our role on remand to require us to engage in
the following, stepwise assessment of petitioners’ remaining
arguments: First, we must determine whether the commis-
sion properly concluded that Frontier and ATR each had the
sort of power that the Supreme Court recognized as having
    1
      Based on its conclusion that substantial evidence supported the commis-
sion’s final order, the majority summarily rejects petitioners’ argument that,
insofar as the evidence was insufficient to find that ATR and Frontier controlled
the landfill, Demers likewise could not be held liable. 323 Or App at 47. Although
I disagree with the majority’s rationale for rejecting that argument, I likewise
would reject it, as I explain below. I therefore concur as to the majority’s disposi-
tion on that issue.
50                                Kinzua Resources v. DEQ

“control”—specifically, the legal authority to direct Kinzua’s
handling of the landfill site. Petitioners’ argument that nei-
ther ATR nor Frontier can be deemed to have had unilateral
legal authority to direct the LLC’s operations underlies that
part of the inquiry.
          Second, if we conclude that the commission’s ratio-
nale is theoretically sound, we must determine whether its
resulting conclusion is supported by substantial evidence
and reason. Lockett v. Teacher Standards & Practices Comm.,

, 

 (2017) (“We must set aside
or remand an agency’s order if it is not supported by sub-
stantial evidence in the record. ORS 183.482(8)(c). Implicit
in the requirement that the order be supported by substan-
tial evidence is a requirement that the agency’s findings and
conclusions be supported by ‘substantial reason.’ ” (Internal
quotation marks and brackets omitted.)).
          Third, we must consider whether petitioners’ argu-
ment as to Demers’s liability “assumes that ATR and Frontier
also were not persons ‘controlling’ the landfill.” Kinzua III,

 n 10. In other words, if the success of peti-
tioners’ argument that Demers cannot be held liable appears
to depend upon our conclusion regarding the liability of ATR
and Frontier, then we must consider whether that conclusion
in fact leads to a different result for Demers. If, however,
petitioners’ argument as to Demers is not dependent upon
that conclusion, then the issue is outside the scope of the
Supreme Court’s remand, and it would not be appropriate
to consider it further. See State v. Williams, 

, 

, rev den, 

 (2016) (declining
to consider issue on remand where Supreme Court had spe-
cifically instructed Court of Appeals to consider a different
issue).
          I turn to the assessment that I understand the
Supreme Court’s remand instructions to require, starting
with whether the commission’s final order properly found
“control” within the meaning established in Kinzua III.
A. Did Kinzua’s individual members have control over the
     LLC’s property?
          I would begin by considering whether, as the
commission concluded, the status of ATR and Frontier as
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member-managers of Kinzua necessarily gave each of them
the requisite legal authority over both the LLC and its prop-
erty, including the landfill.2 As noted, 323 Or App at 42, the
commission concluded that, because Kinzua was a member-
managed LLC, and because ATR and Frontier were the only
members of the LLC, those entities, by virtue of their mem-
bership in Kinzua, “had control * * * over the operations of
the landfill as a matter of law.” (Emphasis added.) Petitioners
argue in essence that the commission erred as a matter of
law in drawing that conclusion, because here the LLC had
only two members, each of which had equal voting power
with the other. Citing ORS 63.130(1),3 petitioners argue that
neither Frontier nor ATR can be deemed to be in “control” of
Kinzua or its property, including the landfill site. And, they
contend, to the extent that there might be an evidentiary
basis for finding that one or both entities had control of the
landfill for reasons other than its status as a coequal mem-
ber of the LLC, the commission erred by making that deter-
mination as a matter of law, rather than based on evidence
in the record. I agree with petitioners on both points.

         I acknowledge that, as a general matter, it was not
unreasonable for the commission to conclude that, to the
extent that ATR and Frontier controlled Kinzua within the
meaning of Kinzua III, they also controlled Kinzua’s prop-
erty, including the landfill. In a different but analogous
context, the Supreme Court has analogized the relation-
ship that an LLC bears to its members to the relationship
that a corporation has with its shareholders. See Cortez v.
    2
      As we observed in our previous opinion Kinzua Resources v. DEQ, 

, 409 n 5, 

 (2018), adh’d to on recons, 

, 

 (2019), rem’d, 

, 

 (2020) (Kinzua I), petitioners have not
argued that, as business entities, ATR and Frontier are not “persons” within the
meaning of ORS 459.205 and ORS 459.268.
    3
      ORS 459.268.
ORS 63.130 provides, in part:
        “(1) In a member-managed limited liability company, unless otherwise
    provided in the articles of organization or any operating agreement:
        “(a) Each member has equal rights in the management and conduct of
    the limited liability company’s business; and
        “(b) Except as otherwise provided in subsection (3) of this section, any
    matter relating to the business of the limited liability company may be
    decided by a majority of the members.”
52                                          Kinzua Resources v. DEQ

Nacco Materials Handling Group, 

, 263 n 12, 

 (2014). In Cortez, the court observed that an LLC
member can be a “passive” owner of the LLC, “much like
a corporate shareholder”; alternatively, the member might
actively manage the LLC as either a member-manager or
as the designated manager in a manager-managed LLC.

 Here, although the member-managers of an LLC (like
officers or directors of a corporation) presumably can del-
egate authority over particular aspects of the LLC’s oper-
ations to others—including the LLC’s employees—the
commission implicitly found no evidence that legal author-
ity over the landfill had been delegated to anyone else.4
Cf. 

 (where member-manager of LLC had del-
egated primary responsibility for workplace safety to LLC
personnel, member-manager could not be held personally
liable in absence of a showing that delegation itself had
been negligent or that member-manager had negligently
exercised any retained oversight authority). As a result,
the commission’s understanding that, if the entities con-
trolled Kinzua, they also controlled the landfill within the
meaning of ORS 459.205 and ORS 459.268, appears to be
sound.

          As noted, however, our remand instructions require
us to consider petitioners’ argument that the commis-
sion erred in concluding that ATR and Frontier controlled
Kinzua—and therefore Kinzua’s property—when, as
coequal member-managers of the LLC, neither of them
had unilateral control of the LLC. See Kinzua III, 

 (remanding for our consideration the intertwined
questions of whether commission correctly imposed direct
liability on entities as persons “controlling” the disposal site
and whether substantial evidence supported commission’s
finding of control). Petitioners’ contention is that the com-
mission cannot have been imposing direct liability on ATR

    4
      The commission specifically found that Kinzua’s articles of organization
provided for the LLC to be member managed, and that ATR and Frontier had
offered no evidence at the hearing that Kinzua was not, in fact, managed by its
members. From there the commission concluded that the entities also controlled
the landfill. If the commission had found there to be any evidence that ATR and
Frontier had delegated all legal authority over the landfill to someone else, it
would likely have noted that fact.
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or Frontier—as required to avoid the protection that ORS
63.165(1) gives LLC members and managers—“because, in
petitioners’ view, the record is ‘devoid of any evidence that
ATR or Frontier, acting alone, had the authority to direct
Kinzua’s management or conduct.’ ” 

 (noting petitioners’
emphasis “that Kinzua was a two-member LLC” and that
ORS 63.130(1)(b) “specifies that ‘any matter related to the
business of the limited liability company may be decided by
a majority of the members’ ” (emphasis added)).

         For its part, the commission has never challenged
the premise of petitioners’ argument or their understanding
of ORS 63.130. That is, the commission does not appear to
dispute that, for either ATR or Frontier to be accountable
as a person “controlling” the landfill site, there must be evi-
dence to support a finding of individual control, not merely
collective control by coequal decisionmakers. And, given the
presumptions of equal control and majority rule under ORS
63.130(1), there is no apparent basis for the commission to
contend that ATR and Frontier were anything other than
coequal voting members or that the authority that each had
over Kinzua’s operations and property could be exercised
unilaterally, without the consent of the other.5

         Instead, the commission has, over the course of this
appeal, made two other arguments in support of holding
ATR and Frontier liable. First, rather than defend the con-
clusion it had reached in the final order—that the entities
controlled the landfill by virtue of their legal authority over
Kinzua and its property—the commission’s briefing sug-
gested that the evidence in the record could support a find-
ing that both ATR and Frontier in fact exercised authority
over landfill-related matters, that is, actively controlled the
landfill, as opposed to merely having had the power to do

     5
       The majority opinion acknowledges each entity’s coequal status in a
two-member LLC, but somehow leverages that largely legal determination into
a refutation of petitioners’ argument that the record lacked substantial evidence
that either ATR or Frontier had authority to act unilaterally with regard to
Kinzua. 323 Or App at 46-47 (reasoning that Kinzua III effectively dictated that
conclusion, despite the issue having been remanded for us to determine in the
first instance). Respectfully, I do not view the majority’s laudable policy argu-
ments to be an adequate substitute for an analytically sound assessment of peti-
tioners’ substantial-evidence argument.
54                                           Kinzua Resources v. DEQ

so if they so chose.6 Second, as the Supreme Court noted,
the commission contended (after it had issued its final order)
that “its finding that ATR and Frontier were persons con-
trolling the landfill site relied on more than just their sta-
tus as apparently co-equal members of Kinzua.” Id. I will
address those arguments in reverse order, first exploring
whether it is appropriate to consider a rationale other than
the one expressly relied on in the final order—namely, that,
as matter of law ATR’s and Frontier’s “ ‘equal rights in the
management and conduct of’ Kinzua * * * constitute[d] con-
trol over the site”—and, second, considering whether the
fact that the commission arguably could have found that
ATR and Frontier exercised actual control over the landfill
site is a basis on which to uphold the order. Ultimately, my
answer to both questions is “no.”
         As noted, the final order expressly cited ATR’s and
Frontier’s membership in Kinzua as the basis for its con-
clusion that they had control over the landfill “as a matter
of law.” Nonetheless, the commission now contends that its
finding that those entities controlled the landfill site relied
on more than just their coequal-member status. I cannot
agree. In the final order, the commission repeatedly states
that ATR and Frontier can be held liable “based on their
legal authority to control the property of the company,
including the landfill.” And contrary to the commission’s
post-order rationale, nothing in the final order suggests that
the commission relied on anything other than the status of
the two entities as LLC members with equal voting rights
in concluding that they had the requisite legal authority to
control Kinzua.
         Rather, since ORS 63.130(1)(b) would prevent either
entity from directing Kinzua’s activities without the other’s
consent, the only reasonable understanding of the final

    6
      To be fair, the commission at that time was responding to petitioners’ argu-
ment that “active” control was required, so it is perhaps reasonable that it chose
not to focus on the “legal authority” argument that ultimately prevailed in the
Supreme Court. However, the commission did not seek reconsideration of that
court’s decision, which remanded for us to determine whether ATR and Frontier’s
status as coequal LLC members satisfied the newly articulated “legal control”
standard, nor did the commission seek the opportunity to brief that issue to us on
remand.
Cite as 

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order’s rationale is that, because ATR and Frontier col-
lectively had authority over the landfill, they also had the
requisite legal authority over the site for purposes of ORS
459.205 and ORS 459.268. The final order must stand or fall
on the basis of that rationale; the commission may not rely
on a rationale that it first advances on appeal. See, e.g., Drew
v. PSRB, 

, 

 (1996) (agency’s
order must articulate “the reasoning that leads the agency
from the facts that it has found to the conclusions that it
draws from those facts”).
         And, ultimately, that rationale for concluding that
ATR and Frontier “control[led]” the landfill site fails. As
noted, the commission does not dispute that, for it to impose
direct liability against either entity, it must establish
individual—and not merely collective—authority over the
site. Thus, its stated rationale, premised on the entities’ col-
lective authority to control Kinzua and its property, fails to
satisfy a critical prerequisite to liability under ORS 459.205
and ORS 459.268. The commission has simply never
explained how, with each entity’s authority being wholly
conditioned on the other entity’s approval, either member
could individually be deemed to satisfy Kinzua III’s “legal
control” requirement. Thus, unlike the majority, I would
conclude that the commission erred in concluding that ATR
and Frontier controlled the landfill site within the meaning
of ORS 459.205 and ORS 459.268. I therefore respectfully
dissent from the majority’s conclusion upholding the com-
mission’s order on that basis.
B.   Does substantial evidence support liability as to ATR
     and Frontier?
          I next turn to whether we should uphold the commis-
sion’s final order on the ground that ATR and Frontier col-
lectively exercised actual control over the landfill site, such
that they might be held liable even if they could not be held
liable based on their legal authority alone. I recognize that,
given the preceding discussion, there may be little point in
considering that question. That is, since the commission’s
order relied on a flawed “collective authority” rationale in
concluding that ATR and Frontier were persons controlling
the landfill site, and since the order does not offer any other
56                                     Kinzua Resources v. DEQ

rationale for that conclusion, it should follow that the order
is not supported by substantial evidence. See Lockett, 

 (“Implicit in the requirement that the order
be supported by substantial evidence is a requirement that
the agency’s findings and conclusions be supported by ‘sub-
stantial reason.’ ” (Additional internal quotation marks and
brackets omitted.)); see also Jenkins v. Board of Parole, 

, 

 (2014) (the substantial-reason
requirement means that an agency must articulate the con-
nection between the facts that it found and the conclusions
it draws). Put another way, where an agency’s order does
not articulate the rationale that the agency seeks to rely
on, it follows that the order lacks the requisite connection
between the facts found and the conclusions reached based
upon those facts.

         Nonetheless, given the Supreme Court’s mandate, I
will briefly consider the evidence that the commission points
to in support of its conclusion that ATR and Frontier con-
trolled the landfill site. The commission argues in its brief
on appeal:
     “Under the Articles of [Organization] for Kinzua * * * ATR
     and Frontier manage Kinzua. As such, they had ‘equal
     rights in the management and conduct’ of Kinzua. ORS
     63.130(1)(a). They could and did authorize sale of Kinzua’s
     property, and authorized Demers to act on their behalf to
     bring Kinzua into compliance with its permit. Any action
     that Kinzua chose to take or not to take was directed by its
     managing members. See ORS 63.077 (powers of an LLC);
     ORS 63.130 (rights of member of an LLC). In the absence
     of contrary evidence, it must be assumed that Kinzua acted
     in accordance with the direction of its members when it
     applied for and obtained the permit from DEQ, filed its clo-
     sure plan, chose not to provide financial assurance, chose
     to accept a final load of waste from the sawmill, chose
     not to contest DEQ’s 2010 enforcement order, and chose
     not to properly close and maintain the landfill after it
     stopped accepting waste. ATR and Frontier were exercising
     restraining or directing influence and had power over all of
     the activities and omissions of the member-managed LLC,
     Kinzua.”

(Emphases added.)
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          There are three problems with the commission’s
argument. The first problem is that many of the facts the
commission now seeks to rely on were never found by the
commission in its order. For example, the commission did not
find that ATR and Frontier authorized the sale of Kinzua’s
property. And although the commission did find that
Frontier and ATR decided to have Demers respond to DEQ’s
inquiries about fires at the landfill site, the commission did
not find that the entities or their constituents “authorized
Demers to act on their behalf to bring Kinzua into compli-
ance with its permit.” Finally, even if, as suggested, Kinzua
might be “assumed” to have acted pursuant to the direc-
tives of its member-managers when it acted at all, the com-
mission itself never explicitly drew that inference. Indeed,
the language of the order suggests the opposite. The order
states: “That DEQ did not present any evidence that ATR
Services and Frontier Resources actually exercised their
legal control over the operations of the landfill[ ] is not deter-
minative of whether they had control.” (Emphases added.)
In other words, because the commission’s theory was that it
could impose liability based on the entities’ legal authority
or “power” to control the landfill site, it expressly considered
it unnecessary to find that either entity had actually exer-
cised that authority. As a result, it did not make many of the
findings that it now purports to rely on.

         A second problem with the commission’s argument
is that even the findings that the commission actually made
in the final order—such as the nature of Kinzua’s organi-
zational structure or the entities’ authority over Kinzua—
simply reflect the flawed “collective authority” theory dis-
cussed above. That is, it may well be true that, working
together, ATR and Frontier could “control” the landfill site.
However, the question for purposes of this discussion is
whether the commission found that they in fact exercised
that control—it did not, and that “finding” therefore cannot
support the commission’s conclusion that ATR and Frontier
were persons controlling the landfill under ORS 459.205
and ORS 459.268.

        The final and perhaps most significant problem
with the commission’s “actual control” argument is that the
58                                 Kinzua Resources v. DEQ

facts that the commission highlights almost all relate to its
argument on appeal that “ATR and Frontier were exercising
restraining or directing influence” (emphasis added), rather
than the rationale underlying its order. Again, in its final
order, the commission expressly disavowed any reliance
on a theory that ATR and Frontier actually exercised any
authority that they had over the landfill; instead the com-
mission relied exclusively on the theory that the entities had
the power to do so, which was all that had to be shown to
qualify them as “controlling” under the applicable statutes.
And while the Supreme Court may have upheld the commis-
sion’s interpretation of ORS 459.205 and ORS 459.268 in
that regard, the court did not suggest that we should uphold
the order on a basis other than the one that the commission
expressly relied on in the order itself. For each of those three
reasons, I would conclude that the commission’s determina-
tion that ATR and Frontier controlled Kinzua’s landfill site
within the meaning of those statutes is not supported by
substantial evidence and reason. Accordingly, I respectfully
dissent from that aspect of the majority opinion.

C. Does the commission’s conclusion as to ATR and Frontier
   affect Demers?

         I turn finally to the last issue potentially within
the scope of the Supreme Court’s remand: whether the com-
mission’s order is valid as to Demers, an individual who is
a member of Frontier and a shareholder and president of
ATR, but who, unlike the other petitioners, is not a member
of Kinzua. I say “potentially” within the remand because of
the way in which the Supreme Court described the issue.
As noted, the court’s remand instructions stated, “[t]o the
extent that petitioners’ argument [as to Demers] assumes
that ATR and Frontier also were not persons ‘controlling’
the landfill, the challenge as to Demers is within the scope
of our remand to the Court of Appeals.” Kinzua III, 

 n 10. I understand those instructions to mean that, if
the commission erred in concluding that ATR and Frontier
were liable, and if, as a result, the commission also erred
in holding Demers liable, then we must address that error.
If, however, the commission’s conclusion that Demers was
liable was not dependent upon or otherwise affected by any
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erroneous conclusions regarding ATR and Frontier, then the
issue of his liability is not within the scope of remand.
         I will not belabor that issue. As we explained in our
first opinion, the commission’s findings as to Demers dif-
fered from those it made as to ATR and Frontier. See Kinzua
Resources v. DEQ, 

, 

(2018), adh’d to on recons, 

, 

 (2019),
rem’d, 

, 

 (2020) (Kinzua I) (discussing
“operational relationship” that Demers had with Kinzua
and communications and efforts that Demers engaged in
regarding the landfill). Based on actions that Demers had
taken on behalf of Kinzua and related to the landfill,
   “the commission found that Demers both had and exercised
   control over the landfill site. Based upon those findings, the
   commission concluded that Demers personally was liable
   for the violations of ORS 459.205 and ORS 459.268.”
Id. at 401 (emphasis added). In other words, the commission’s
conclusion that Demers was liable neither turned on its con-
clusion that ATR and Frontier were liable nor resorted to
the reasoning that I would reject with regard to those enti-
ties. Moreover, unlike its conclusion that ATR and Frontier
were liable because they had the legal authority to control
Kinzua and its landfill, as to Demers the commission found
that he had in fact exercised authority over the landfill site.
Id.
         As a result, were I writing for the majority, I would
conclude that petitioners’ argument as to Demers does not
“assume[ ] that ATR and Frontier also were not persons ‘con-
trolling’ the landfill,” Kinzua III at 689 n 10. Stated differ-
ently, petitioners’ argument that the commission erred in
holding Demers liable is not based on their ultimately (in
my view) correct position that the commission erred as to
ATR and Frontier. Accordingly, petitioners’ argument as to
Demers is not within the scope of remand, and I, like the
majority, would decline to address it further. See Williams,

. I therefore concur as to that part of
the majority opinion.