Septic inspectors sue Kitsap County health department over costs

A septic tank inspection company has sued the Kitsap Public Health District and two of its employees in U.S. District Court, citing the Racketeer Influenced and Corrupt Organizations (RICO) Act, which was originally designed to crack down on criminal gangs and brought down five New York City Mafia families in the 1980s.

Grizzly General Contractors, also known as Grizzly Septic Services, filed a lawsuit in July in U.S. District Court for Western Washington, alleging that the health district—an independent local government agency—engaged in racketeering for personal gain by conspiring to exploit septic tank inspectors for free labor, using them to collect maintenance fees paid to the health district through third-party software.

The contracting company has filed seven charges against KPHD, alleging criminal activity that violates the RICO Act, the federal Civil Rights Act and Trafficking Victims Protection Reauthorization Act, the Washington State Criminal Profiteering Act, and the Consumer Protection Act, among others. Grizzly’s attorney, Edward Chung of the law firm Chung & Malhas & Mantel, is also seeking $30 million in damages on behalf of the company and an injunction.

Kitsap Public Health District told the Kitsap Sun that septic inspection fees are regulated and in accordance with state law. However, the district declined to comment specifically on the lawsuit or directly address the allegations in the lawsuit.

Alleged collusion by debt collection software

At the center of the lawsuit is the software that KPHD uses to collect maintenance fees and that septic tank inspectors are required to use, which is owned by KPHD Assistant Director Eric Evans and managed by KPHD IT specialist Edwin North. Grizzly alleges that Evans and KPHD conspired for personal gain through the software, called Online RME.

Kitsap County residents who own certain types of septic systems are required by law to enter into a monitoring and maintenance contract with a service provider, such as Grizzly, that is certified by the health district, KPHD Administrator Yolanda Fong said in a prepared statement for the Kitsap Sun. The KPHD then collects an administrative “maintenance contract fee” on each new contract to cover the cost of regulating the monitoring and maintenance of septic systems.

The practice is standard for local public health agencies in the state and is authorized by state law, Fong said. A KPHD document provided by Fong outlines flat rates for various services, revealing, for example, that a treatment fee costs $4.50, a notary fee costs $10 and photocopies cost 10 cents per page. Chung argued that the fees were not regulated, citing a KPHD informational brochure that said the fees could change from time to time.

The KPHD entered into a free contract with eOnsite, the predecessor of Online RME, in 2006 to modernize its contracting and reporting system, Fong said.

Chung questioned KPHD’s contract with Online RME, submitting documentation in the lawsuit showing that a health district service manager had sent an email to a paralegal in 2018 stating that there was no contract with Online RME.

Septic inspectors have been required to collect maintenance contract fees since 2005, classified as independent contractors. Inspectors invoice residents and then pay those collected fees to Online RME, which would in turn pay the fees to KPHD, Chung said in the lawsuit, noting that Evans founded eOnsite in 2005, which merged with Orenco Systems, Inc. to create Online RME.

All fees that providers collect and submit through the portal go directly to the health district to fund its services, Fong said. KPHD received $392,920 in monitoring and maintenance fees in 2023 from the combined 32 district-certified providers it lists on its website, KPHD spokesman Tad Sooter added in an email.

Despite Fong’s assurances that KPHD does not pay to use Online RME and receives all funds collected in maintenance fees, Chung claims that Evans and KPHD benefit financially from the partnership. He also claims that such fees can only be collected by a county treasurer, not the health district or a septic tank inspector.

Chung also described the process by which Grizzly claims it was used for free by the KPHD and forced to comply despite 81 protest attempts. Staff from Chung’s law firm initially contacted the Kitsap Sun, but when Chung was emailed a list of questions, he did not respond to numerous requests.

Should septic tank inspectors work unpaid?

Grizzly alleges that KPHD and the numerous defendants named in the lawsuit not only conspired to force septic tank inspectors to collect maintenance contract fees, but also knowingly profited from that labor.

Chung argued in the lawsuit that collecting the fees costs money in billing, shipping, banking, travel time, accounting liability and collections, for which the septic tank inspectors have never been compensated. He offered space to one to 50 John and Jane Doe plaintiffs, setting up a potential class action lawsuit if other septic tank inspectors in the county feel similarly wronged. He also offered space to up to 50 John and Jane Doe defendants who may also have participated in the alleged conspiracy.

“The financial impact this has had on Grizzly Septic alone is enormous,” Chung said in court documents, alleging the combined financial burden on Grizzly amounts to $1.02 million over 20 years.

Service providers must also submit the fees they collect within 30 days of invoicing, Fong said, or they won’t be able to enter into new contracts through the portal. Chung argued that excluding inspectors from the service without due process was a “punitive measure” and violated septic inspectors’ Fourth, Fifth and Fourteenth Amendment rights by affecting their livelihoods.

Grizzly was banned from Online RME 81 times from 2012 to 2022, resulting in a total suspension of 244 days, Chung said in the lawsuit. He did not respond to questions about why Grizzly did not comply with KPHD policies.

Has ownership created a conflict of interest?

Chung alleged in the lawsuit that Kitsap County officials may not have been aware that Evans and North Online privately owned and operated RME and failed to disclose their conflict of interest.

Fong did not comment when asked whether Evans and North’s ownership and operation of Online RME posed a conflict of interest given their staff positions at KPHD, stating that she could not comment on matters in the lawsuit. She also did not respond to a question about whether Evans and North disclosed their connection to Online RME, although she did state that employees of the health district are instructed to disclose potential conflicts of interest in accordance with their employee handbook.

An attorney for KPHD’s risk pool insurer, Enduris, told Chung in a 2022 letter that KPHD “has never paid anything to Mr. Evans or Online RME.” He further stated that Chung’s “claim appears to be largely motivated by the assumption that Eric Evans has derived and continues to derive some economic benefit from the District’s use of Online RME. That is false.”