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USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 92-2276
ALLENS MANUFACTURING COMPANY, INC.,
Plaintiff, Appellant,
v.
NAPCO, INC.,
Defendant, Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Raymond J. Pettine, Senior U.S. District Judge]
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Before
Breyer, Chief Judge,
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Friedman,* Senior Circuit Judge,
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and Stahl, Circuit Judge.
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Michael J. McGovern with whom Indeglia & McGovern was on brief
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for appellant.
Mark A. Pogue with whom Deming E. Sherman and Edwards & Angell
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were on brief for appellee.
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August 25, 1993
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*Of the Federal Circuit, sitting by designation.
BREYER, Chief Judge. Allens Manufacturing Co.
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brought this diversity action against Napco, Inc., claiming
that Napco failed to provide it with proper "clean up"
equipment, as promised, and on time. Allens adds that this
failure is responsible for a significant part of a $210,000
fine that Allens has agreed to pay the Environmental
Protection Agency ("EPA"). After listening to Allens'
proposed evidence about damages -- evidence designed to show
for what portion of the fine Napco was responsible -- the
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district court ruled that Allens' evidence was not
sufficient to pinpoint Napco-caused damages with "reasonable
certainty." It then granted Napco's motion to exclude
evidence of the fine, at which point the parties agreed that
the court should dismiss the complaint for failure to allege
the jurisdictionally-necessary $50,000 harm. 28 U.S.C.
1332(a). Allens, having reserved the right to appeal, does
so. It asks us to review the court's evidentiary ruling.
We find the ruling lawful, and affirm the court's judgment.
I
Background
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Our review of the rather skimpy record before us
on appeal suggests the following: Allens makes metal belt
buckles, shoe buckles, and other items, through processes
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that generate waste water containing pollutants. In
February 1985 Allens ordered from Napco a waste water
treatment system that Napco installed during 1985, and which
began to operate in early 1986. In the meantime, Allens
apparently violated federal environmental rules and
regulations, some governing waste water discharges and
others setting forth reporting requirements.
The record suggests that by 1989, EPA had compiled
a list of one hundred or more separate violations committed
by Allens, which took place in more than fifty different
months, between September 1981 and June 1989. EPA
apparently contemplated possible fines for these violations
amounting to $384,000. Allens' counsel then wrote to EPA,
pointing out that Allens had "acted in good faith," was not
"recalcitrant," and had "cooperated with . . . authorities
to achieve compliance as expeditiously as possible." He
suggested a "penalty . . . in the $50,000 to $65,000 range."
EPA offered to settle with Allens for a fine of $125,000,
but Allens refused.
EPA then referred the matter to the Department of
Justice ("DOJ"). DOJ insisted on considerably more than
$125,000. Allens and DOJ ultimately entered into a consent
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decree, in which, as we have said, Allens agreed to pay a
fine of $210,000.
Subsequently, Allens filed this lawsuit, claiming
that Napco failed to live up to its promises to install
clean-up equipment, and seeking reimbursement for the fine
(and related costs) insofar as the fine reflects "discharge"
violations taking place after September 1985 (by which time,
according to Allens, Napco should have had proper equipment
operating).
Before the case went to trial, Napco told the
court that Allens could not show with reasonable certainty
how much of the fine resulted from Napco's claimed failings.
Without some such showing, Napco argued, the $210,000 fine
figure was misleading and prejudicial. And, it asked the
court to keep evidence of that figure from the jury. The
court itself then heard Allens' evidence on the matter
(consisting of several EPA documents and the testimony of an
expert). It agreed with Napco that this evidence failed to
prove damages with "reasonable certainty," and it granted
Napco's evidentiary motion. Then, the parties having agreed
that, given the evidentiary ruling, Allens could not prove
significant harm, the court dismissed the complaint for
failure to set forth a "matter in controversy exceed[ing]
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the sum or value of $50,000." 28 U.S.C. 1332(a). See
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Gibbs v. Buck, 307 U.S. 66, 72 (1939) (plaintiff's good
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faith allegation that the matter in controversy exceeds the
jurisdictional amount requirement suffices to meet the
amount in controversy test, unless challenged); Dept. of
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Recreation & Sports v. World Boxing Ass'n, 942 F.2d 84, 88
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(1st Cir. 1991) (citing Gibbs, 307 U.S. at 72) (once
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jurisdictional amount is challenged, plaintiff must show
facts sufficient to show that it is not a "legal certainty"
that the claim involves less than the jurisdictional
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amount). See also 14A Wright, Miller & Cooper Federal
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Practice and Procedure 3702 at 26-28 (favoring policy of
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according trial judges broad discretion as to the mode of
determining jurisdictional fact issues).
Allens appeals. Allens argues only that its
proposed evidence is sufficient to prove damages with the
requisite degree of certainty. We have examined that single
claim. We conclude that the district court's determination
of that evidentiary matter is legally correct. And, as
neither party raises any other objection, we affirm the
complaint's dismissal.
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II
The Evidence
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Allens, in its effort to show that Napco was
responsible for some reasonably identifiable portion of the
$210,000 fine, presented two EPA documents and the testimony
of one expert. The first document quantifies the economic
"benefit" that Allens obtained as a result of its failure to
follow EPA rules and standards. The second EPA document,
called a "gravity calculation," lists individually each of
56 months, refers to Allens' violations during that month,
and sets forth a possible fine for each month, the amount of
which varies with the number of violations during that
month, their duration, their significance, and the harm they
may have caused. The "benefit" amounted to about $94,000.
The "gravity calculation" totalled $290,000. Their sum is
approximately $384,000.
The expert, a former EPA lawyer, interpreted these
documents in light of EPA's "Policy on Civil Penalties,"
reprinted in 17 ELR 35,083 (Feb. 16, 1984), and his own
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experience at EPA. He apparently conceded that the first
document (showing a "benefit" to Allens of $94,000) had
little to do with Napco-related violations. He analyzed the
second document -- the "gravity calculation" -- month by
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month. He added together all penalties for any month (after
September 1985) that referred only to discharge violations.
He allocated penalties in any (post-September 1985) month
that showed both "discharge" and "reporting" violations,
between those two categories. He then added up the total.
He found that, of the "gravity calculation"'s $290,000
total, approximately $190,000 reflected "discharge
violations" occurring after September 1985. He concluded
that Napco-related violations amounted to $190,000, or about
half, of the two documents' $394,000 total.
The expert recognized that the final fine was not
$394,000; rather, it was $210,000. He said, however, that
since Napco-related violations accounted for about half the
two documents' $394,000, they likely accounted for half the
final $210,000 fine. That is because, in his view,
adjustments to the $394,000 figure likely reflected similar
treatment of both Napco-related and non-Napco-related
violations. That is to say (in the words of Allens'
brief), "a reduction of the original fine calculation no
more altered the ratio of discharge to reporting violations
than removing a slice of mince meat pie would alter the
ratio of apples to raisins in the remaining pie."
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III
The Problem with the Evidence
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The basic problem with this evidence lies in the
fact that the EPA did not fine Allens a hypothetical
$394,000. Rather, it proposed a fine of $125,000. Then
DOJ, after consulting with EPA, ended up imposing a fine of
$210,000. The record does not explain how the EPA or DOJ
arrived at these latter, actual, fine amounts. Indeed, the
record offers no more support for the pro rata (or "mince
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meat pie") theory than it offers for other, equally
plausible (and equally speculative) theories that would
produce dramatically different results.
We concede that, in the absence of any evidence
about what actually happened, one might believe, as the
expert suggested, that the proposed $125,000 fine simply
reflected the fact that EPA's independent authority to
negotiate a settlement has a $125,000 ceiling, 40 CFR
122.41(a)(3), and that EPA reduced all the elements of the
$394,000 calculation pro rata in order to reach this
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ceiling. On the other hand, it is at least as likely that
EPA, in reaching the $125,000 figure, attached different
degrees of significance to different elements of the
$394,000 calculation. EPA's Policy on Civil Penalties
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states that EPA will adjust initially calculated ("benefits"
plus "gravity") fine amounts, in light of such factors as
(1) the violator's history of cooperation or recalcitrance,
as "indicated through pre-settlement action," (2) whether
actions were negligent or wilful, and (3) the violator's
ability to pay. See 17 ELR 35,083. And here, Allens could
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make (and Allens' counsel did make) strong arguments to EPA
that Allens' discharge violations were unintended and minor
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(not "exceed[ing] the effluent limitations by any
significant degree"). If EPA accepted these arguments, it
might have proved more willing to forgive the discharge
violations than the reporting violations for which Allens
offered no excuse. Or, even if it did not accept these
arguments, EPA might have placed more weight on forfeiting
"benefits" than on a calculation of "gravity."
Similarly, EPA and DOJ might have arrived at the
final $210,000 figure by increasing pro rata a $125,000
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figure (or reducing pro rata the initial $384,000). But it
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is just as plausible, if not more plausible, to believe that
they arrived at that figure in light of Allens' lack of
cooperation, or "recalcitrance" as revealed in "pre-
settlement action," and potentially increased litigation
costs for the government. And, these factors may have had
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nothing to do with discharge violations after September
1985.
The upshot is that we do not know what actually
led EPA and DOJ to end up with a fine of $210,000.
Moreover, this uncertainty reflects, not closely-balanced
evidence, but a lack of evidence, for the record contains no
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evidence about what actually happened, nor does it set forth
evidence of any agency rule, pattern, or practice indicating
that pro rata reduction or increase is the norm. The result
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is that we can only speculate about the extent to which
EPA's "mitigating" or "aggravating" factors may have applied
in respect to each of the many (1981 through 1989)
violations that initially called for a fine, and about the
extent to which those factors may have played a role in
determining the ultimate fine level. More importantly, the
expert could do no more than speculate, for he had no
personal knowledge about how EPA calculated the ultimate
fine, nor did he have any special reason for believing that
these factors applied pro rata to every element identified
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in the "benefit" and "gravity" calculations. Finally, the
experienced trial judge decided that the jury, too, would
have to speculate in order to determine the level of
damages. And, for the reasons stated, we agree with his
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conclusion -- that the plaintiff's evidence does not
identify those damages with the "reasonable certainty" that
the law requires. See National Chain Co. v. Campbell, 487
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A.2d 132, 134-5 (R.I. 1985) (damages must be established
"with reasonable degree of certainty" and plaintiff "cannot
rely upon speculation" in order to prove his damages);
Restatement (Second) of Contracts 352 (1981) ("Damages are
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not recoverable for loss beyond an amount that the evidence
permits to be established with reasonable certainty").
Allens raises one final point. It says that the
district court should not have insisted that it demonstrate
damages to a "reasonable certainty," for in doing so, it
permits Napco to benefit from uncertainty caused by Napco's
own conduct. See Eastman Kodak Co. v. Southern Photo
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Materials Co., 273 U.S. 359, 379 (1927) ("[A] defendant
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whose wrongful conduct has rendered difficult the
ascertainment of the precise damages suffered by the
plaintiff, is not entitled to complain that they cannot be
measured with the same exactness and precision as would
otherwise be possible"); U.C. Castings Co. v. Knight, 754
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F.2d 1363, 1374 (7th Cir. 1985) (same). The short,
conclusive answer to this claim is that Napco's conduct did
not create, nor can one expect Napco to have foreseen, the
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present problem. Rather, Allens has found it difficult to
prove damages because EPA will not permit its officials to
testify, 40 C.F.R. 2.403, 2.404(a), and Allens did not
insist that EPA publicly explain (perhaps in the decree
itself) the basis for calculating the fine. Napco is not
responsible.
In sum, the district court properly found that
Allens' proposed evidence about damages failed to
demonstrate damages to a reasonable degree of certainty.
That being so, the court could properly exclude evidence of
the $210,000 fine (presumably on grounds of "prejudice"
overcoming "relevance," see Fed. R. Evid. 403). And the
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parties, in effect, agree that, without the evidence, the
district court could dismiss the complaint for failure
properly to meet the $50,000 jurisdictional requirement.
For these reasons, the judgment of the district court is
Affirmed.
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Document Info
Docket Number： 92-2276
Filed Date： 8/25/1993
Precedential Status： Precedential
Modified Date： 9/21/2015