United States v. Dell'Aquila , 150 F.3d 329 ( 1998 )

Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit
8-5-1998
United States v. Dell'Aquila
Precedential or Non-Precedential:
Docket 96-5761
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Filed August 5, 1998
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 96-5761
UNITED STATES OF AMERICA
v.
ANTHONY DELL'AQUILLA, Enterprises and Subsidiaries;
HARRY GRANT; SANDALWOOD CONSTRUCTION
CORPORATION,
Harry Grant, Sandalwood Construction Corporation,
Appellants
ON APPEAL FROM THE UNITED STATES
DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civ. No. 88-3232)
ARGUED
October 30, 1997
Before: Nygaard, McKee and Weis, Circuit Judges
(Filed: August 5, 1998)
Roy Alan Cohen
Charles E. Erway, III (Argued)
Toby A. Holbreich
Porzio, Bromberg & Newman, P.C.
163 Madison Avenue
Morristown, NJ 07962-1997
Attorneys for Appellants
Faith S. Hochberg
United States Attorney
Peter G. O'Malley
Assistant United States Attorney
Susan Handler-Menahem (Argued)
Assistant United States Attorney
970 Broad Street, Suite 700
Newark, New Jersey 07102
Attorneys for Appellee
OPINION OF THE COURT
McKee, Circuit Judge.
We are asked to review the district court's grant of
summary judgment in favor of the United States and
against Harry Grant and Sandalwood Corporation. The
court ruled that Grant and Sandalwood were liable for
violations of the Clean Air Act, 42 U.S.C. S 7401 et seq.,
("CAA"), and the National Emission Standard for Hazardous
Air Pollutants established for asbestos, 40 C.F.R. pt. 61,
subpt. M. ("NESHAP"), as a matter of law, and assessed
penalties against Grant and Sandalwood in the amount of
$2,975,000 under 42 U.S.C. S 7413(b). That sum represents
the maximum fine for each violation for each day the
violation existed.
We will affirm the grant of summary judgment in favor of
the United States based upon Grant's and Sandalwood's
non-compliance with an EPA compliance order for each day
they were "operators" beginning on June 29, 1988.
However, since we conclude that there is a genuine issue of
material fact as to the three visible emissions that were
charged, we will vacate that portion of the district court's
order that is based upon those three violations, and
remand for further proceedings consistent with this
opinion. We also conclude that there is a genuine issue of
material fact as to whether Grant and Sandalwood
functioned as operators under the CAA until September 14,
1988. Finally, we hold that the district court erred in
calculating the fine Grant and Sandalwood must pay.
2
Therefore, on remand, the United States must establish the
number of days that Grant and Sandalwood functioned as
operators, and the district court will recalculate penalties
and fines accordingly.
I.
This matter concerns approximately sixty-five acres of
waterfront property located at 1301 Hudson Street,
Hoboken, New Jersey ("Hoboken property"). It is undisputed
that Anthony Dell'Aquilla is the owner of this property. On
May 5, 1988, Dell'Aquilla and Grant entered into an
Agreement to Form Joint Venture ("Agreement") to develop
the Hoboken property. Under the terms of the Agreement,
Grant would become the project manager in charge of the
"overall management and control of the business and
affairs of the venture." App. at 280. The Agreement outlined
the responsibilities and representations relevant to the
environmental condition of the property. It provided that, in
the event that any hazardous environmental condition was
discovered on the property, Dell'Aquilla would cure the
condition at his own expense and indemnify Grant against
any and all "damages, remedial orders, judgments or
decrees, and all costs and expenses related thereto." App.
at 277. According to Grant, Dell'Aquilla also provided him
with copies of correspondence from contractors certifying
that the property and buildings on the property had been
inspected and were free of asbestos. Id. at 539. The
Agreement further provided that Grant would receive a joint
ownership interest in the property contingent upon
refinancing. However, the refinancing was neverfinalized,
and Grant also learned that Dell'Aquilla could not convey
clear title so Grant never obtained an ownership interest
under the Agreement.
Grant invested time and money developing the Hoboken
property in his role as project manager. He and his wife
were the majority shareholders in Sandalwood.
Sandalwood's responsibilities included hiring engineers and
architects to develop the Hoboken property, and contracting
for the demolition of the buildings already on the property
and removal of the resulting debris. Id. at 164 & 229. Grant
3
also incorporated Grant Marina Urban Renewal Corporation
to participate in the development.
The development of the property began on June 10,
1988, with the demolition of existing buildings. On June
17, 1988, the Environmental Protection Agency (EPA) sent
inspectors Robert Fitzpatrick and Jose Rodriguez to the
property because the EPA had not been notified of the
demolition as required by law. App. at 483. While there,
Inspector Fitzpatrick observed insulation that appeared to
be asbestos containing material ("ACM") covering several
pipes in one of the demolished buildings. He also noticed
that the debris from the demolition appeared to contain
ACM. Id. at 21-22. His observations were corroborated
when subsequent tests performed upon samples taken from
the area established they contained asbestos.
Fitzpatrick returned to the Hoboken property several
times during the summer of 1988. During these visits, he
witnessed numerous violations of state and federal
environmental laws. The violations included the continued
unauthorized demolition of ACM structures, visible
emissions of ACM dust, improper removal of ACM, and
inadequate wetting of the ACM which allowed particles to
become airborne. On June 29, 1988, the EPA issued a
compliance order under S 112 of the CAA in which it
commanded Dell'Aquilla, Grant and Sandalwood to comply
with all federal asbestos regulations. However, despite the
notice, the parties continued the demolition in the same
manner that had given rise to the EPA notification.
On July 22, 1988, the government filed a complaint
against Dell'Aquilla, Grant and Sandalwood alleging a total
of 119 violations of asbestos-related regulations, and
seeking injunctive relief and civil penalties under the CAA
and NESHAP. Dell'Aquilla settled with the government and
agreed to pay a disclosed amount in fines ($400,000). The
government then moved for summary judgment against
Grant and Sandalwood. Grant and Sandalwood did not
dispute the violations except for allegations that visible
emissions of asbestos occurred on three dates (June 27,
July 7, and July 13, 1988). However, Grant and
Sandalwood argued that they were not liable under the
regulations because they were not "owners or operators" of
4
the Hoboken property. See 40 C.F.R. S 61.02. The district
court held that they were "operators", and found them in
violation of the regulations.1
The court imposed the statutory maximum penalty of
$25,000 per day for each violation for a total fine of
$2,975,000. Grant and Sandalwood filed a motion to
amend and alter the judgment seeking to reverse the
penalty amount. However, the court refused to reconsider
the amount of the penalty because it concluded that Grant
had initially failed to submit evidence of his finances. This
appeal followed.
Grant and Sandalwood argue that: (1) there are genuine
issues of material fact concerning their status as "owners or
operators" of the Hoboken property, (2) the government
failed to make a prima facie case for each of the 119
violations alleged, and (3) the district court abused its
discretion in failing to reconsider the $2,975,000 penalty in
light of Grant's financial situation. We have jurisdiction
over this appeal pursuant to 28 U.S.C. S1291.2
II.
The CAA was enacted, in part, "to protect and enhance
the quality of the Nation's air resources." 42 U.S.C.
S 7401(b)(1). In order to meet this objective, Congress
authorized the EPA to establish emission standards for
enumerated hazardous air pollutants. 42 U.S.C.
_________________________________________________________________
1. The district court also denied the government's request for injunctive
relief because it concluded that the government had not established that
Grant and Sandalwood were currently engaged in or planned to engage
in activities which would lead to further violations. D. Ct. Op. at 20.
2. We exercise plenary review. Hamilton v. Leavy, 117 F.3d 742, 745 (3d
Cir. 1997) (citation omitted). Summary judgment is appropriate when the
pleadings and other submissions show that there is no genuine issue as
to any material fact and that the moving party is entitled to judgment as
a matter of law. Fed. R. Civ. P. 56; see also, Bank of Nova Scotia v.
Equitable Fin. Management, Inc., 882 F.2d 81, 83 (3d Cir. 1989). The
"mere existence of some alleged factual dispute between the parties will
not defeat an otherwise properly supported motion for summary
judgment; the requirement is that there be no genuine issue of material
fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).
5
S 7412(d)(1995). The asbestos standards, at 40 C.F.R. pt.
61, subpt. M, establish mandatory standards for the
renovation and demolition of a facility that contains
asbestos, and for the disposal of asbestos. A violation of
this NESHAP constitutes a violation of the CAA. See 42
U.S.C. S 7412.
A. Liability as Operator
The CAA imposes strict liability upon owners and
operators who violate the Act. See United States v. B & W
Inv. Properties, 38 F.3d 362, 367 (7th Cir. 1994). Therefore,
although Grant and Sandalwood argue that Dell'Aquilla
and/or his agents led them to believe that any asbestos on
the property had properly been removed and all necessary
permits had been obtained, see Appellants' Br. at 8-10,
those assertions are not relevant to our analysis, and we
need not respond.
The CAA defines an "owner or operator" as "any person
who owns, leases, operates, controls, or supervises a
stationary source." 40 C.F.R. 61.02. A stationary source is
"any structure, facility, or installation which emits any air
pollutant which has been designated as hazardous by the
Administrator." Id. Grant and Sandalwood concede that the
property is a "stationary source" and only challenge their
status as "owners or operators" of the property.
It is clear that neither Grant nor Sandalwood were
owners of the Hoboken property. Under the Agreement,
Grant's procurement of refinancing for the property was a
condition precedent to the fruition of his ownership
interest. In addition, as mentioned above, the contemplated
conveyance of an ownership interest under the Agreement
never occurred because Dell'Aquilla could not convey clear
title. Accordingly, Dell'Aquilla remained the sole owner of
the property. However, it is now axiomatic that a non-owner
can still be liable as an "operator." Moreover, our
determination of whether one is an operator or owner under
the CAA must be conducted in a manner consistent with
the broad reach of the statute. See, e.g., United States v.
Tzavah Urban Renewal Corp., 696 F. Supp. 1013, 1021 (D.
N.J. 1988) (" `[O]wner or operator' is defined broadly for
purposes of asbestos regulations.").
6
Here, the district court relied in part upon United States
v. Walsh, 783 F. Supp. 546 (W.D.Wash. 1991), aff'd, 8 F.3d
1013 (9th Cir. 1993), to conclude that Grant and
Sandalwood were not shielded from liability merely because
they never acquired legal title. In Walsh, the court opined
that a person is strictly liable under the CAA if he or she
had "significant or substantial or real control and
supervision over a project." Id. at 548. Although we are not
bound by the holding in Walsh, we agree with the district
court that the analysis in Walsh is correct.
The control and supervision that Grant and Sandalwood
exercised over the project was more than sufficient to
support the district court's conclusion that they were
operators under the CAA. For instance, Grant negotiated
the contracts for the demolition work that was done on the
project. App. at 183-85. During his deposition, Grant
described his role in the project as follows: "I met the
[contractors], I review which price is better. We discussed
with our people which [sic] better to hire, et cetera, et
cetera." Id. at 184. See Tzavah Urban Renewal Corp., 696
F. Supp. at 1021 (finding that defendants who were
charged with hiring and firing contractors were "operators"
under the CAA). Grant signed the demolition contracts on
behalf of Sandalwood and Grant Marina. The contractors
he retained were involved with all aspects of the project
from demolition to asbestos clean-up. In addition, Grant
was regularly on the property and witnessed the demolition
of several of the asbestos-infested buildings. App. at 244.
Grant argues that much of what he said during his
deposition should have been disregarded because he does
not have a strong command of the English language.
However, the district court properly rejected that assertion.
Grant was represented by counsel during all phases of
these proceedings. Moreover, he had a sufficient command
of English to enter into an intricate agreement with
Dell'Aquilla, incorporate two companies, and negotiate
construction contracts as well as contracts with engineers
and architects.
Grant clearly possessed "significant or substantial or real
control and supervision" and was therefore an "operator"
within the meaning of the CAA. Walsh, 783 F. Supp. at
7
548. Even though his formal role as owner or project
manager never materialized, he clearly functioned in that
capacity as evidenced by the control he exercised over the
project. Therefore, the district court properly concluded
that he was the functional equivalent of an "owner" or
"manager."
Sandalwood attempts to evade liability by shifting
responsibility to Grant Marina. Sandalwood argues that
even if Grant was an operator of the property, Sandalwood
was not an operator because Grant Marina was specifically
created to participate in the Hoboken development.3 The
precise point at which Grant Marina began to exercise
responsibility over the property is unclear. However, it is
clear that Sandalwood was in existence prior to Grant
Marina and was active in the daily operations of the
property. Grant stated that Sandalwood's responsibilities in
the project included: "hir[ing] attorney[s], engineer[s],
architect[s] or anything like that to work on the site." App.
at 163. There is also uncontradicted evidence that
Sandalwood continued to be involved in the project after
the issuance of the compliance order on June 29, 1988. For
example, a check dated July 11, 1988, in the amount of
$25,000 payable to cash was signed by Sandalwood, and
the checkbook register indicates that the proceeds of that
check were intended for one of the contractors. App. at 256.
The record also contains a letter dated July 28, 1988, from
Sandalwood to L. Corio & Sons, Inc. The letter states, in
part, that: "[t]his letter constitutes a modification of the
contract between Sandalwood Construction Corp.,
contractor, and L. Corio and Sons, Inc., sub-contractor, for
demolition work at [the Hoboken property]." This letter was
signed by Sandalwood, and there is no reference
whatsoever to Grant Marina. Id. at 415. Sandalwood clearly
exercised sufficient control over the development of the
property to qualify as an "operator." See generally, B & W
Inv. Properties, 38 F.3d at 367 ("B & W exercised control
over the parcel sufficient to bring [it] within the scope of
`owner or operator' designation because its name appeared
on court papers and on a contract with an asbestos clean-
up company."). Thus, the district court correctly concluded
_________________________________________________________________
3. Grant Marina was not a named party in this action.
8
that there were no genuine questions of material fact as to
the operator status of either Grant or Sandalwood.
The 119 charged violations include a violation for each of
the sixty-seven days of non-compliance from June 29,
1988, until the Agreement was terminated on September
14, 1988. Grant testified at his deposition that, to the best
of his knowledge, he visited the site each day from the
beginning of the demolition until the demolition was
completed; however, the record is unclear as to when
demolition was completed. Although it may have continued
until September 14, 1988, there is nothing to establish that
its duration was coterminous with the Agreement.
Similarly, although Sandalwood clearly functioned as an
operator, this record also fails to establish how long
Sandalwood acted in that capacity.
In United States v. Bestfoods, ___ S. Ct. ___, 1998 WL
292076*7 (1998), the Supreme Court stated:
under CERCLA, an operator is simply someone who
directs the workings of, manages, or conducts the
affairs of a facility. To sharpen the definition[of
operator] for purposes of CERCLA's concern with
environmental contamination, an operator must
manage, direct, or conduct operations specifically
related to pollution, that is, operations having to do
with the leakage or disposal of hazardous waste, or
decisions about compliance with environmental
regulations.
Although the Court was there addressing the definition of
"operator" in CERCLA, and not the CAA, the purposes of
the two statutes is the same, and the language in question
is nearly identical. Accordingly, the Court's gloss on the
CERCLA definition is relevant to our inquiry. Grant and
Sandalwood were clearly involved with contracts relating
directly to the polluting activity beginning with the first
notice on June 29, 1988. However, that does not mean that
either or both continued to function in that capacity until
the Agreement terminated.4 Thus, we conclude that the
_________________________________________________________________
4. In United States v. Bestfoods, et al., S. Ct., 1998 WL 292076 (1998),
the Supreme Court analyzed the liability of a parent corporation for a
9
district court erred in assuming that Grant and
Sandalwood could be held liable for each violation for every
day until September 14, 1988.
Grant and Sandalwood also challenge six violations of 40
C.F.R. S 61.146 concerning notice to the EPA based upon
their assertion that they were not "owners or operators" of
the Hoboken property. As discussed above, we find they
were operators; accordingly, this challenge is without merit.
Moreover, as we discuss infra, it was not preserved.
B. Waiver
On appeal, Grant and Sandalwood attempt to argue that
the government did not present a prima facie case for 34
demolition related NESHAP violations, and 18 disposal-
related violations. See Appellants' Br. at 27-37, Points II &
III. The government asserts that this attack has been
waived, except insofar as appellants challenge violations for
visible emissions related to disposal on June 27, July 7,
and July 13, 1998. See Appellee's Br. at 19. Appellants'
attempt to counter the government's assertion of waiver by
arguing that they "maintained throughout their briefs below
that the asbestos NESHAPs did not apply," and that their
general assertion before the district court is sufficient to
preserve the more specific argument raised here. Reply Br.
at 6.
Third Circuit Court of Appeals Local Appellate Rules
require that each appellant's brief contain "a designation by
reference to specific pages of the appendix or place in the
proceedings at which each issue on appeal was raised,
objected to, and ruled upon . . . ." 3d Cir. L.A.R. 23.1.
Appellants' brief states that the insufficiency of the
_________________________________________________________________
subsidy under the analogous Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"). The Court held that
a parent corporation can be liable "both directly, when the parent itself
operates the facility, and indirectly, when the corporate veil can be
pierced under state law." 1998 WL 292076 *4. Although we are not
confronted with issues of separate corporate identity, we mention
Bestfoods because it illustrates that the issue of Sandalwood's tenure as
an operator is not as "clear cut" as the United States suggests.
10
government's prima facie case was raised at "Add-2, pp.3-4,
14." See Appellants' Br. at 2. Those references are to the
district court's opinion. At the relevant portions of those
pages the district court stated that Grant and Sandalwood
"do not contest" several of the government's allegations, see
D. Ct. Op. at 4, "nor do the defendants deny the presence
of ACM . . . [t]hus, the demolition of structures containing
verified ACM and the witnessed emissions support the
Court's conclusion that visible emissions of asbestos
occurred on all of the days alleged." Id. at 14. The
appellants' brief also states the following: "[o]n summary
judgment below, the government incorrectly claimed that
appellants were not challenging any of the alleged NESHAP
violations other than the visible emissions. (CITE) That is
incorrect." Appellants' Br. at 31. Appellants apparently had
no more success finding a reference where the argument
was preserved than we did as no "cite" is provided.
Moreover, we have reviewed the Appendix submitted by the
appellants in its entirety, and we do not find any assertion
sufficient to preserve this issue on appeal.
We have previously noted that, absent exceptional
circumstances, an issue not raised in district court will not
be heard on appeal. Fleck v. KDI Sylvan Pools, Inc., 981
F.2d 107, 116 (3d Cir. 1992). "Exceptional circumstances
have been recognized when the public interest requires that
the issue[s] be heard or when a manifest injustice would
result from the failure to consider the new issue[s]." Altman
v. Altman, 653 F.2d 755, 758 (3d Cir. 1981) (citations
omitted). We find no such exceptional circumstances here.
Accordingly, appellants have waived much of their
challenge to the sufficiency of the government's evidence to
support the NESHAP violations. However, the government
concedes that appellants did not waive their challenge to
the three visible emissions of asbestos in violation of 40
C.F.R. S 61.152(b). Accordingly, we turn our attention to
those violations.
C. Visible Emissions
The district court held that the government had
established that Inspector Fitzpatrick witnessed visible
emissions on June 27, 1988, July 7, 1988, and July 13,
11
1988. The court cites "Plaintiff's Exhibit 5, 73-74, 77-79,
89-90, 92-94" for that finding. D. Ct. Op. at 14. Neither
appellants nor the government have included that exhibit in
the Joint Appendix filed in this court. We have, however,
reviewed Inspector Fitzpatrick's affidavit, and the portions
of the transcript from his deposition that are included in
the Joint Appendix. That evidence establishes that the
inspector saw what he believed to be visible emissions of
asbestos on June 27, 1988 (Fitzpatrick Aff. P 7), and July
7, 1988 (Fitzpatrick Aff. P 11), but it does not mention
witnessing any emissions on July 13, 1988 (Fitzpatrick Aff.
P 12). App. at 22-23. Samples that the inspector took on
June 27 and July 7 tested positive for asbestos. Although
we find evidence of only two visible emissions, Grant and
Sandalwood do not dispute that there were three. Rather,
they contend that the government failed to establish as a
matter of law that the three emissions were covered by
NESHAP. We agree.
Section 61.152(b) of the asbestos NESHAP states that
each owner or operator of any source shall "[d]ischarge no
visible emissions to the outside air during the collection,
processing (including incineration), packaging,
transporting, or disposition of any asbestos-containing
waste material generated by the source." 40 C.F.R.
S 61.149. "Visible emissions" are "any emissions containing
particulate asbestos material that are visually detectable
without the aid of instruments." 40 C.F.R. S 61.141 (1988).5
Grant and Sandalwood argue that, even though the
inspectors saw dust and debris, the government did not
establish that the emissions contained asbestos, or even
that they came from asbestos-infested buildings.
Appellants' Br at 34.
_________________________________________________________________
5. The current regulations clarify this definition. "Visible emissions" is
currently defined as "any emissions, which are visually detectable
without the aid of instruments, coming from RACM or asbestos-
containing waste material, or from any asbestos milling, manufacturing,
or fabricating operation." 40 C.F.R. S 61.141 (1997). For purposes of this
appeal, however, the more ambiguous definition found in the regulations
that were in place at the time of the Hoboken property development is
applicable.
12
The district court relied upon United States v. Midwest
Suspension and Brake, 824 F. Supp. 713, 730 (E.D. Mich.
1993), aff'd, 49 F.3d 1197 (6th Cir. 1995), for support of its
conclusion that summary judgment was warranted as to
these visible emissions. In Midwest Suspension, the
government had proven through circumstantial evidence
that visible emissions, as defined under NESHAP, had been
observed on three occasions. During the first occasion, an
EPA inspector observed emissions while a dumpster was
being unloaded at a landfill. Id. at 729. After this emission
settled on top of a box, a sample was taken and that
sample later tested positive for asbestos. On the second
occasion, the government presented evidence that a sample
of material that had been lying loose in a dumpster prior to
transport tested positive for asbestos. An EPA inspector
followed that dumpster as it was being transported and he
observed a dust emission from the dumpster while it was
being unloaded. Id. The court noted that although that dust
was not tested, it could reasonably be inferred that the
discharge came from the lose material that had been tested.
The last visible emissions observed were discharged from a
dumpster as it was being emptied in a landfill. The EPA
inspector did not take samples of those emissions, but he
testified that the emissions were "rust colored, which
suggests that significant component of the emission was
shot blast waste." Id. at 730. According to the inspector,
this type of waste usually contains asbestos. Based on this
evidence, the court concluded that the government had met
its burden at trial. See also, United States v. Hugo Key and
Son, Inc., 731 F. Supp. 1135, 1271 (D. R.I. 1989) (finding
a S 61.141 violation where evidence that friable asbestos
material fell to the ground and remained there with no
precautions to contain the material).
Here, the inspector saw ACM in dry debris on the
ground, app. at 22-23, and contractors loading demolition
debris into dumpsters, id. at 23. The debris in the area was
not wet down. id. Samples, which later tested positive for
asbestos, were taken on June 27 and July 7. However, the
samples that were taken were not samples of the "dust"
from the emissions. Moreover, the government did not show
the proximity of the visible emissions either to the area
where the contractors were loading debris or to the area
13
where the asbestos-infested buildings were being
demolished. Inspector Fitzpatrick also failed to describe the
emissions as containing any specific type of "rust color"
waste that may suggest the presence of asbestos. Moreover,
unlike Midwest Suspension, there is no indication that the
two positive test samples were taken from settled
emissions. The evidence does not even establish that the
samples were taken in the vicinity of the visual emissions.
The inspector's affidavit is certainly consistent with a
conclusion that the visible emissions contained asbestos.
However, summary judgment requires more than a
possibility or even a probability that it was asbestos. The
government's proof must be sufficient to establish that fact
as a matter of law. The proof here is too tenuous to pass
that test. Moreover, we must draw all reasonable inferences
in favor of Grant and Sandalwood, the nonmoving parties.
Josey v John R. Hollingworth Corp. 996 F.2d 632, 634 (3d
Cir. 1993).
Accordingly, the government did not establish that the
visible emissions contained asbestos, and summary
judgment as to those violations was inappropriate. See
generally, United States v. Owens Contracting Servs., Inc.,
884 F. Supp. 1095 (E.D. Mich. 1994) (concluding that there
must be some proof that the visible emissions contained
asbestos).
III. Maximum Penalty
42 U.S.C. S 7413(b) was amended in 1990 to read, in
part, as follows:
The Administrator shall, as appropriate . . . commence
a civil action . . . to assess and recover a civil penalty
of not more than $25,000 per day for each violation.
42 U.S.C. S 7413(b) (West 1995) (emphasis added). Prior to
the 1990 Amendments, the CAA provided that the civil
penalty would not exceed "$25,000 per day of violation." 42
U.S.C. S 7413(b) (West 1988) (emphasis added). Thus, it is
not clear whether the pre-Amendment maximum fine of
$25,000 could be imposed on each violation for every day
of the violation, or if it was to be limited by the number of
days the owner/operator was in violation regardless of the
14
number of violations on a given day. However, the district
court concluded that either version of the statute allowed it
to impose the maximum fine for each violation, for each day
the violation existed, and that the 1990 Amendments
merely clarified that congressional intent. See D. Ct. Op. at
15. That conclusion is not challenged on appeal.6
Appellants do argue that the district court abused its
discretion in determining the amount of the fine, but they
do not challenge the court's interpretation of the statute.
Since appellants do not challenge that ruling here, we will
proceed on the assumption that the 1990 Amendments
apply. We will limit our inquiry to whether the court abused
its discretion in setting the amount of the fine at the
statutory maximum.
42 U.S.C. S 7413(e)(1) provides in relevant part as follows:
In determining the amount of any penalty to be
assessed . . . the administrator or the . . . court shall
take into consideration (in addition to such other
factors as justice may require) the size of the business,
the economic impact of the penalty on the business,
the violator's full compliance history and good faith
efforts to comply, the duration of the violation . ..
payment of the violator of penalties previously assessed
for the same violation, the economic benefit of the
noncompliance, and the seriousness of the violation.7
(emphasis added). The total amount of the fines resulting
from assessing $25,000 per day for each of 119 violations
the court found from June 28, 1988 (the date of thefirst
compliance order) to September 14, 1988 (the date the
Agreement was terminated) was $2,975,000. The district
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6. Although we need not decide this issue in this appeal, we note that
there is substantial precedent supporting the district court's
interpretation. E.g. Midwest Suspension, 824 F. Supp. at 733-34; United
States v. A.A. Mactal Constr. Co., 22 Envtl L Rep. 21200 (applying the
1990 amended Act to violations that occurred in 1988 and 1989);
Atlantic States Legal Found., Inc. v. Tyson Foods, Inc., 897 F.2d 1128
(11th Cir. 1990) (applying a similar provision in the Clean Water Act).
7. The government misquotes this statute in its brief. It sets forth the
factors included in the statute, but omits "the economic impact of the
penalty on the business," from the quotation. See Appellee's Br. at 36.
15
court relied upon our holding in Public Interest Research
Group of New Jersey, Inc. v Powell Duffryn Terminals, Inc.,
913 F.2d 64 (3d Cir. 1990) ("PIRG"), to begin with this
maximum amount, and proceeded by determining whether
any of the specified considerations in S 7413(e)(1) justified
mitigation of that total. The court stated "[w]hen imposing
a penalty, courts may start with the statutory maximum
and then consider factors in mitigation of the maximum."
D. Ct. Op. at 16 (citing PIRG). The court concluded that
neither the elaborated factors, nor the interests of justice
supported mitigating the fine. The court specifically refused
to mitigate the fine based on Grant's bankruptcy.
The Court will not mitigate the civil penalty based upon
Grant's filing for Chapter 11 Bankruptcy . . . There is
nothing to indicate that Grant cannot afford the
penalty other than Grant's conclusory statement that
he has lost all of his assets. Grant has not submitted
tax records or findings of the bankruptcy court
regarding his financial condition. Without such
financial records, the Court cannot accurately
determine that the fine would be too great.
D. Ct. Op. at 19.
Thereafter, Grant filed a motion to amend the judgment
under Fed. R. Civ. P. 59(e), and included copious financial
records with that motion. However, the district court,
accepting the recommendation of the magistrate judge,
denied that motion because the records had not been
submitted previously, and nothing in the record suggested
that the records had been unavailable when the court
decided the summary judgment motion. The court stated,
"[i]ndeed, defendants admit that the evidence was available,
but claim that they did not submit it because they were not
on notice that the Court would address both liability and
penalty aspects of the case. The record belies this claim."
App. at 2. Accordingly, we must address the district court's
failure to reconsider the fine based upon the additional
financial information.8 However, before addressing that
_________________________________________________________________
8. Our standard of review for the district court's denial of the
appellants'
motion to alter or amend a judgment under Fed. R. Civ. P. 59(e) is for
an abuse of discretion because the underlying order was an assessment
of monetary penalties. See B & W Properties, 38 F.3d at 368 (citation
omitted).
16
issue, we will comment upon the process used by the
district court to determine the appropriate amount of the
fine.
Courts usually calculate a fine under the CAA by starting
with the maximum penalty. See, e.g., B & W Investment
Properties, 38 F.3d at 368 ("[I]n considering fines under the
Act, courts generally presume that the maximum penalty
should be imposed."); Tyson Foods, Inc. 897 F.2d 1128,
1141 ("Upon remand, the district court should first
determine the maximum fine. . . . it must reduce the fine
in accordance with the factors spelled out in [the statute].").9
As noted above, the district court here relied upon our
decision in PIRG to state: "courts may start with the
statutory maximum and then consider factors in mitigation
of the maximum." D. Ct. Op. at 16. However, although
courts may, and frequently do, begin at the maximum, we
have never suggested that such a procedure is always
appropriate. Moreover, our research has not found any
appellate decision that would suggest that method of
determining a fine under the Clean Air Act is always the
best way of proceeding.
In PIRG, the district court assessed the maximum penalty
allowed under the Act and then reduced that amount based
upon some of the mitigating factors. We reversed based
upon our conclusion that the district court erred in
mitigating the fine because of the violator's good faith, and
the regulatory agency's inaction. We reasoned that,
although such a reduction may be appropriate when it is in
the interests of justice, the record before the district court
did not support a reduction for the particular violator's
good faith nor the "nonfeasance" of the regulatory agency.
Id. at 80-1. We did not suggest that courts should always
begin a fine assessment at the maximum. There will be
instances when doing so will initially set the bar so high
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9. Tyson Foods dealt with fines for violations of the Clean Water Act.
However, the Clean Water Act and the Clean Air Act are in pari materia,
United States v. Stauffer Chemical Co., 684 F.2d 1174 (6th Cir. 1982)
aff'd, 464 U.S. 165 (1984), and courts often rely upon interpretations of
the Clean Water Act to assist with an analysis under the Clean Air Act.
See, e.g., Midwest Suspension, 824 F. Supp. at 733.
17
that it will remain at a height that is inconsistent with the
mitigating factors in S 7413(e)(1) even after it is lowered.
Here, for example, the fine of nearly $3,000,000 bore no
relationship to the violators' ability to pay. This is contrary
to Congress' mandate that courts consider "the economic
impact of the penalty on the business." 42 U.S.C.
S 7413(e)(1). The fine that is imposed must have some
reasonable, and proportionate "nexus" to the violations and
the violators. See Midwest Suspension, 49 F.3d at 1204
("Midwest's argument that the district court did not
establish any nexus whatsoever between the violations
claimed and the penalties assessed has no merit."). Such a
nexus is implicit in Congress' command that courts include
within their mitigation analysis "other factors as justice
may require." 42 U.S.C. S 7413(e)(1).
Courts can achieve an equitable mitigation (if any is
warranted in a particular case) either by starting at the
maximum penalty and mitigating it downward based upon
the factors in S 7413(e)(1), or simply relying upon those
factors to arrive at an appropriate amount without starting
at the maximum. The statute only requires that thefine be
consistent with a consideration of each of the factors the
court is obligated to evaluate.
Here, appellants' financial condition was relevant to a
determination of the appropriate penalty, and the district
court abused its discretion in refusing to consider it. The
court justified its refusal for the reasons stated above,
however, the court had a legal obligation to consider each
of the factors set forth in the Act. As noted above, Congress
stated that a court "shall take into consideration" each of
the factors set forth in that Act. 42 U.S.C. S 7413(e)(1).
Here, the court's refusal to consider Grant's bankruptcy is
inconsistent with that mandate. Accordingly, the court
abused its discretion in refusing to consider appellants'
financial records. See Midwest Suspension, 824 F. Supp. at
735 (rejecting government's request to adopt a rule of law
requiring a violator to have "burden of presenting evidence
to support a reduction from the statutory maximum
penalty" or pay maximum amount).
Dell'Aquilla settled with the government for $400,000.
The evidence that the appellants attempted to introduce via
18
their Rule 59(e) motion could have (if accepted by the court)
established their utter inability to pay the fine that was
imposed. That fine was nearly 750% greater than the
settlement the government accepted from Dell'Aquilla, the
owner of the property.10 We do not mean to suggest that the
district court was somehow limited by the government's
settlement. It may well be that a court would be justified in
imposing such a disparate fine because of the policy
considerations that favor settlements as well as the
particular circumstances in a given prosecution under the
CAA. However, the district court should have considered
appellants' financial records before concluding that such a
disparity was consistent with its obligation to consider the
mitigating factors set forth in the statute. Since the court
failed to consider appellants' financial condition, we will
remand for further proceedings consistent with this
opinion. At those proceedings, the court will consider the
financial records previously offered by appellants. Since the
government may not be able to establish that the three
visible emissions constituted violations or that Grant and
Sandalwood are liable for all of the period from June 29,
1988 to September 14, 1988, the resulting fine may be
smaller than the one originally imposed regardless of how
the court calculates the fine. However, any fine that is
imposed must be consistent with the command of 42
U.S.C. S 7413(e)(1).
IV.
For the foregoing reasons, we will affirm in part, reverse
in part, vacate the court's order as to the penalty, and
remand for further consideration.
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10. In addition, to Grant's financial problems, including bankruptcy,
there is evidence in the record that the economic benefit gained by Grant
and Sandalwood was just $100,000 -- the amount expended to the
cleanup cost of ACM on the Hoboken property. See Report and
Recommendation of the Magistrate Judge at 6.
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A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
20