State Ex Rel. Ohio Attorney General v. Shelly Holding Co. , 135 Ohio St. 3d 65 ( 2012 )

[Cite as State ex rel. Ohio Atty. Gen. v. Shelly Holding Co., 135 Ohio St. 3d 65, 2012-Ohio-
5700.]
THE STATE EX REL. OHIO ATTORNEY GENERAL, APPELLEE, v. SHELLY
HOLDING COMPANY ET AL.; SHELLY MATERIALS, INC., ET AL., APPELLANTS.
[Cite as State ex rel. Ohio Atty. Gen. v. Shelly Holding Co.,
135 Ohio St. 3d 65, 2012-Ohio-5700.]
Air-pollution control—42 U.S.C. 7413(e)(2)—Continuing violations—R.C.
3704.05—Penalties.
(No. 2011-0252—Submitted November 16, 2011—Decided December 6, 2012.)
APPEAL from the Court of Appeals for Franklin County,
No. 09AP-938, 191 Ohio App. 3d 421, 2010-Ohio-6526, 946 N.E.2d 295.
__________________
CUPP, J.
{¶ 1} This appeal asks us to determine the proper method of calculating
the civil penalty to be levied against an industrial facility for noncompliance with
the terms of its air-pollution-control permit. The appellate court concluded that
according to the terms of the Shelly Materials, Inc., permits, the penalty is to be
calculated from the initial date of noncompliance until the facility demonstrates
that it no longer violates the permits.
{¶ 2} We conclude that the appellate court reached the proper conclusion
in this matter, and therefore, we affirm the judgment of the court of appeals.
I. Factual and Procedural Background
a. Shelly Company
{¶ 3} The Shelly Company is an Ohio corporation engaged in the
business of surfacing roads. It owns several subsidiaries, including appellants
Shelly Materials, Inc., and Allied Corporation (collectively, “Shelly”).1 Shelly
1. The original defendants in the state’s complaint were the Shelly Holding Company, the Shelly
Company, Shelly Materials, Inc., Allied Corporation, and Stoneco, Inc. At the close of the state’s
SUPREME COURT OF OHIO
owns multiple hot-mix asphalt facilities in Ohio that support its road-surfacing
activities.
{¶ 4} The hot-mix asphalt facilities release pollutants into the air, such as
particulate matter, carbon monoxide, nitrogen oxides, sulfur dioxide, and volatile
organic compounds. The facilities are regulated by the Ohio Environmental
Protection Agency (“Ohio EPA”) pursuant to air-pollution-control permits issued
to Shelly.
b. The Air-Pollution-Control Permits
{¶ 5} The air-pollution-control permits issued to Shelly have a variety of
requirements with which Shelly must comply, including terms that specify the
emission limits for the applicable types of pollutants, set operational restrictions,
and establish monitoring, recordkeeping, and reporting requirements.
{¶ 6} The permits also prescribe the testing method each Shelly facility
must use to establish its compliance with the permit’s emission limit for each
pollutant. The prescribed testing method is set forth at Part II, Section (E) of the
permits, and specifies:
E. Testing Requirements
1. Compliance with the emission limitations specified in
Section A.I of these terms and conditions shall be determined in
accordance with the following methods:
a. Emissions Limitation:
***
Applicable Compliance Method:
case, the Shelly Holding Company and the Shelly Company were dismissed. As relevant to the
issues presented in this appeal, only Shelly Materials, Inc., and Allied Corporation are involved.
2
January Term, 2012
The permittee shall conduct, or have conducted, emission
testing for this emissions unit in accordance with the following
requirements:
***
iv. The test(s) shall be conducted while the emissions unit
is operating at or near its maximum capacity, burning on-spec oil
and using virgin materials, unless otherwise specified or approved
by the Central District Office.
Each air-pollution-control permit further provides that the Shelly permit holder
“shall remain in full compliance with all applicable State laws and regulations and
the terms and conditions of this permit.”
{¶ 7} In 2002 and 2006, five of Shelly’s hot-mix asphalt facilities
performed the facility testing as required by their permits. During the facility
testing, these five hot-mix asphalt facilities emitted pollutants in excess of the
allowable emission limit set forth in the permits and, in doing so, failed to comply
with the maximum-capacity stack-test (“stack-test”) requirement of the permit.2
c. Trial Court Decision
{¶ 8} In July 2007, the state of Ohio, by and through the attorney
general, filed suit for injunctive relief and civil penalties. The complaint
presented 20 claims for relief. In the complaint, the state alleged that the
companies had violated state law and Ohio’s federally approved plan for the
implementation, maintenance, and enforcement of air-quality standards as
required by the federal Clean Air Act, when it
2. In each of the five instances, Shelly ultimately remedied the permit violation. Three facilities
obtained a modified permit from the Ohio EPA increasing the allowable emission limit. One
facility conducted another test and met the emission limit contained in the permit. Another facility
also complied with the emission limit contained in the permit upon subsequent testing, but Shelly
nevertheless requested a modified permit from the Ohio EPA to increase the allowable emission
limit.
3
SUPREME COURT OF OHIO
installed and thereafter operated new sources of air pollution
without obtaining appropriate permits, modified and thereafter
operated existing sources of air pollution without obtaining
appropriate permits, exceeded air pollutant emission limitations,
burned fuel containing excessive levels of mercury, lead and other
hazardous chemical constituents, and violated the terms and
conditions of applicable air pollution permits.
The state did not allege any violations, or seek to enforce any provision, of the
federal act.
{¶ 9} The state’s seventh claim for relief alleged that in 2002 and 2006,
the Shelly facilities emitted pollutants in excess of the allowable emission limit
set forth in the permits and, in doing so, failed to comply with the stack-test
requirement. The state alleged that the Shelly facilities violated R.C. 3704.05(C),
which provides that “no person who is the holder of a permit * * * shall violate
any of the permit’s terms or conditions.”
{¶ 10} Shelly entered into stipulations with the state in which Shelly
admitted liability to various claims in the complaint and acknowledged that when
it conducted the stack testing, its facilities emitted pollutants in excess of the
allowable amounts set forth in the permits and the facilities violated their
respective permits. After a bench trial, the court issued a decision finding for the
state on some, but not all, claims for relief. On the state’s seventh claim for relief,
the only claim relevant here, the court acknowledged that Shelly did not dispute
that on the days of stack testing in which the emissions exceeded the limits set
forth in the permits, the permits were violated. The court accepted Shelly’s
stipulations as findings of fact.
4
January Term, 2012
{¶ 11} In determining the appropriate penalty, the trial court
acknowledged that the question remaining to be decided was whether, for
purposes of calculating the penalty, the violation should be deemed to have
occurred only on the day the facility failed the stack tests and emitted in excess of
the permitted emission limitation or whether the violation should be presumed to
be continuing until a new stack test demonstrated compliance with the permit.
{¶ 12} The trial court concluded that the violation occurred only on the
day on which the facility failed the stack tests. The court accepted Shelly’s
argument that the conditions under which Shelly conducted the required stack
tests did not represent the facilities’ normal operating conditions and that it
operated its facilities within the permitted emission limits. Therefore, the court
concluded, it was not reasonable to infer that the violation continued for every day
thereafter until a subsequent emission test demonstrated compliance. The court
assessed a civil penalty of $4,500 on the seventh claim for relief and a total of
$350,123.52 on all claims.
d. Appellate Court Decision
{¶ 13} The state appealed and challenged the manner in which the trial
court had calculated the civil penalties. The state asserted that the penalty should
be assessed for each day a facility was out of compliance with its permit, which
would be from the day it failed the stack testing and continuing until the facility
demonstrated that it no longer failed the stack test as required by the permit.
Under the state’s rationale, the time period for calculating the penalty commenced
on the day that the stack test was conducted and showed that the facility exceeded
the allowable emission limit of its permit. The last penalty day, according to the
state, could be (1) the day on which the facility conducts a subsequent maximum-
capacity test and the facility emissions are within the allowable limits of the
permit, (2) the day on which the Ohio EPA issues a new permit for the facility
with revised emission limits that are the same as or greater than the emission
5
SUPREME COURT OF OHIO
released on the day when the facility conducted its initial emission test, or (3) the
day on which the facility could show that it would pass a subsequently conducted
maximum-capacity test because intervening facility modifications were made.
{¶ 14} The appellate court sustained the state’s assignment of error in this
regard and remanded the matter to the trial court for recalculation of the fine, in
its discretion. 191 Ohio App. 3d 421, 2010-Ohio-6526, 946 N.E.2d 295, ¶ 66.3
{¶ 15} Thereafter, we accepted Shelly’s appeal under our discretionary
jurisdiction. 128 Ohio St. 3d 1481, 2011-Ohio-2055, 946 N.E.2d 240.
II. Air-Pollution-Control Legislation
{¶ 16} The principal federal legislation in this matter is the Clean Air Act,
42 U.S.C. 7401 et seq., which is intended “to protect and enhance the quality of
the Nation’s air resources” and to encourage pollution prevention through
reasonable federal, state, and local governmental actions. 42 U.S.C. 7401(b)(1)
and (c). Pursuant to the authority of the Clean Air Act, the administrator of the
United States Environmental Protection Agency (“EPA”) establishes national
standards for air quality and certain types of air pollutants. 42 U.S.C. 7409(a)(2)
and (b)(1); 40 C.F.R. 50.1 through 50.17. The act also requires that the states
adopt and submit to the administrator a plan for specifying how these air-quality
standards will be achieved and maintained. 42 U.S.C. 7407(a) and 7410(a). The
act anticipates that states will achieve the air-quality standards through use
permits, enforcement, and emission monitoring. 42 U.S.C. 7410(a). Enforcement
and penalty-calculation provisions are set forth at 42 U.S.C. 7413.
{¶ 17} The purposes of Ohio’s Air Pollution Control Act, R.C. Chapter
3704, are “to protect and enhance the quality of the state’s air resources” and “to
3. In addition to presenting to the appellate court an assignment of error challenging the trial
court’s calculation of civil penalties, the state presented three additional assignments of error. 191
Ohio App. 3d 421, 2010-Ohio-6526, 946 N.E.2d 295, ¶ 4. The remaining assignments of error
were each sustained at least in part, and the appellate court’s disposition was to affirm the trial
court’s judgment in part, reverse it in part, and remand the cause “for further proceedings in
accordance with law and consistent with” the appellate court’s decision. Id. at ¶ 68.
6
January Term, 2012
enable the state, through the director of environmental protection, to adopt and
maintain a program for the prevention, control, and abatement of air pollution that
is consistent with the federal Clean Air Act.” R.C. 3704.02(A)(1) and (2). Ohio’s
Air Pollution Control Act states that it is to be construed consistently with the
federal Clean Air Act. R.C. 3704.02(B).
{¶ 18} The director of the Ohio EPA is vested with the authority to
administer R.C. Chapter 3704. The director is authorized to, among other things,
(1) adopt air-quality standards for the state that are no more stringent than
counterpart federal standards, (2) adopt emissions-standard rules necessary to
meet those standards, (3) adopt rules requiring installation permits from the
director as a prerequisite to constructing new sources of air pollution, (4) adopt
rules prohibiting the operation of air-contaminant sources without either a permit
to operate in compliance with applicable rules or a variance issued by the director,
(5) adopt rules pertaining to the issuance, revocation, modification, or denial of
variances that authorize emissions in excess of the applicable emission standards,
(6) require operators of pollution sources to monitor emissions or air quality and
to provide such reports as the director prescribes, and (7) enter upon private or
public property for the purpose of making inspections, taking samples, and
examining records or reports to ascertain compliance with air-pollution statutes,
regulations, or orders. R.C. 3704.03(D), (E), (F), (G), (H), (I), and (L).
{¶ 19} The Ohio EPA director has established administrative rules
requiring air-contaminant sources4 to have either a permit to operate or a variance
4. “Air contaminant source” means “each separate operation, or activity that result or may result in
the emission of any of the following air contaminants:
(1) An air contaminant or precursor of an air contaminant for which a
national ambient air quality standard has been adopted under the Clean Air Act.
(2) An air contaminant for which the source is regulated under the
Clean Air Act.
(3) A toxic air contaminant for which the source is regulated under the
Clean Air Act.
7
SUPREME COURT OF OHIO
and has adopted rules that govern allowable emissions. Ohio Adm.Code 3745-
31-02(A) and 3745-31-09 and Chapters 3745-15 through 3745-26. Variances
afford an exemption from the permit-to-operate requirement and authorize, under
certain conditions, an air-contaminant source to operate without complying with
applicable emission-control requirements. Ohio Adm.Code 3745-31-09(A).
{¶ 20} The Ohio Air Pollution Control Act prohibits certain acts. The
most basic of the prohibitions is that “emissions of an air contaminant” shall not
be “caused, permitted, or allowed” unless a permit or variance allowing the
release of the contaminant has been issued. R.C. 3704.05(A) and (B). See also
Ohio Adm.Code 3745-31-02(A). Additional prohibitions particularly relevant to
the matter under consideration in this case are that “[n]o person who is the holder
of [an air-pollution-control] permit * * * shall violate any of its terms or
conditions,” and that “[n]o person shall violate any order, rule, or determination
of the director issued, adopted, or made under this chapter.” R.C. 3704.05(C),
(G), (J)(2).
{¶ 21} Violations of R.C. 3704.05 may result in civil and criminal
liability. R.C. 3704.06(C) provides that a “person who violates section 3704.05
* * * of the Revised Code shall pay a civil penalty of not more than twenty-five
thousand dollars for each day of each violation.” Injunctive relief and criminal
penalties are also available. R.C. 3704.06(B) and 3704.99.
III. Analysis
{¶ 22} At the outset, we note that Shelly does not dispute that when a
facility emits pollutants in excess of its permitted limit while operating “at or near
its maximum capacity,” it is out of compliance with its air-pollution-control
permits and is liable for a civil penalty on the day of the failed stack test. Shelly
has stipulated that its facilities emitted pollutants in excess of the respective
Ohio Adm.Code 3745-31-01(I).
8
January Term, 2012
permits’ emission limits during the stack-testing process. Thus, the issue raised in
this appeal is not whether any of the Shelly facilities violated their Ohio EPA-
issued permits. Rather, the issue is how long the violation continued in the
interim period until Shelly demonstrated compliance with the permit terms.
Specifically, the issue is whether that violation may be presumed to be continuing
until Shelly rebuts the presumption with competent evidence that a facility is
either (1) not violating its permit or (2) not violating its permit in a continuing
manner. The answer to this question will also answer whether the civil penalty
for the failed stack test is to be calculated according to the rationale applied by the
trial court or to that applied by the appellate court.
{¶ 23} Although it is well established that the amount of a civil penalty
imposed for a violation of pollution-control policies lies within the discretion of
the trial court, e.g., State ex rel. Brown v. Dayton Malleable, 1 Ohio St. 3d 151,
157-158, 438 N.E.2d 120 (1982), Shelly and the state acknowledge that the issues
involved in this case are matters of law and fact. 191 Ohio App. 3d 421, 2010-
Ohio-6526, 946 N.E.2d 295, ¶ 5. Consequently, our focus is whether the appellate
court properly determined that the trial court’s decision to limit emission
violations and resulting penalties to the date of the nonconforming emission
results was without some competent, credible evidence to support it. Id. at ¶ 55.
{¶ 24} The method prescribed by the permit for determining whether
Shelly is operating within the pollution-emissions limitations of its permit is the
stack test. Failing a stack test is a violation of the permit. Likewise, the stack test
would normally be used also to determine when the facility has returned to
compliance. When the facility passes a subsequent stack test, it has used the
methodology prescribed by the permit for establishing that the facility is in
compliance with the permit’s pollution-emission limits. When the trial court
determines, within its discretion, the amount of the penalty to be assessed for the
facility’s permit violation, the court must consider all of the days on which the
9
SUPREME COURT OF OHIO
facility was out of compliance with its permit. Under the stack-test method that
the permit specifies, this would logically include all of the days between the failed
stack test and the subsequently passed stack test.
{¶ 25} Shelly, however, argues two points against considering all of the
days between the failed stack test and the subsequently passed stack test as days
that the law requires the court to include in its penalty assessment.
{¶ 26} First, Shelly argues that the court may not presume that the facility
would exceed the permit’s limit on its pollution emissions unless the state first
makes a prima facie showing that the violation is likely to be ongoing or
continuing. Second, Shelly argues that even if the state makes a showing that the
violation is likely to be ongoing, giving rise to a presumption that the violation
continued for the entire time between the failed stack test and the subsequently
passed stack test, Shelly still may rebut that presumption with evidence other than
the stack test to show that the facility did not exceed its emissions limits on
certain days.5
a. What constitutes a “showing”?
{¶ 27} Shelly first asserts that the state failed to show by a preponderance
of the evidence that any particular Shelly facility was likely to, or actually did,
emit pollutants in excess of its allowable permit limitation for each and every day
of the alleged continuing violation period, including on those days when the
facility was operating under normal conditions rather than at maximum capacity.
5. Shelly’s first proposition of law:
In a civil enforcement action, the state has the burden of proof to
demonstrate by a preponderance of the evidence each and every day of
violation.
Shelly’s second proposition of law:
If a continuing violation of permit terms can be inferred, a permit
holder must be given the opportunity to rebut the inference.
10
January Term, 2012
{¶ 28} The foundation for Shelly’s argument is R.C. 3704.06(B), which
states that the attorney general has the authority to institute proceedings for
violations of R.C. 3704.05 “upon the showing that the person has violated this
chapter or rules adopted thereunder.” (Emphasis added.) Shelly contends that the
phrase “upon the showing” is a standard legal term, which means the act of
establishing through evidence or proof. Shelly further states that because this is
civil litigation, the traditional burdens of proof apply and require the state to carry
its evidentiary burden by a preponderance of evidence. Shelly also cites
decisional law that it claims supports its argument. United States v. Hoge Lumber
Co., N.D.Ohio No. 3:95 CV 7044, 1997 U.S. Dist. LEXIS 22359 (May 7, 1997);
State ex rel. Celebrezze v. Thermal-Tron, Inc., 71 Ohio App. 3d 11, 592 N.E.2d
912 (1992).
{¶ 29} R.C. 3704.06(B) is silent as to what evidentiary requirements are
necessary to constitute a “showing” for purposes of the provision. However,
Ohio’s air-pollution-control statutes, regulations, and policies incorporate the
standards contained in the federal act, which bear upon this question.
{¶ 30} Since 1993, Ohio law has required that all the provisions that
constitute the chapter of Ohio’s air-pollution-control statutes and “all the rules
adopted under it, and all permits, variances, and orders issued under it shall be
construed, to the extent reasonably possible, to be consistent with the federal
Clean Air Act and to promote the purposes of the chapter.” R.C. 3704.02(B);
1993 Am.Sub.S.B. No. 153, effective Oct. 29, 1993. Also, since 2004, 42 U.S.C.
7413(e)(2) has been incorporated by reference into Ohio’s air-pollution-control
regulations. Ohio Adm.Code 3745-31-01(AAAAAA)(2)(mmm).6 Section
7413(e)(2) states:
6. Ohio Adm.Code 3745-31-01(AAAAAA) provides:
11
SUPREME COURT OF OHIO
A penalty may be assessed for each day of violation. For
purposes of determining the number of days of violation for which
a penalty may be assessed * * * where * * * an air pollution
control agency has notified the source of the violation, and the
plaintiff makes a prima facie showing that the conduct or events
giving rise to the violation are likely to have continued or recurred
past the date of notice, the days of violation shall be presumed to
include the date of such notice and each and every day thereafter
until the violator establishes that continuous compliance has been
achieved, except to the extent that the violator can prove by a
preponderance of the evidence that there were intervening days
during which no violation occurred or that the violation was not
continuing in nature.
(Emphasis added.) Section 7413(e)(2).
{¶ 31} The legislative history of Section 7413(e) provides additional
insight into the intent and rationale underlying the continuing-violation
presumption. The Senate report accompanying the 1990 reenactment of Section
Incorporation by reference. This chapter includes references to certain
matter or materials. The text of the incorporated materials is not included in the
regulations contained in this chapter. The materials are hereby made a part of the
regulations in this chapter. For materials subject to change, only the specific
version specified in the regulations are incorporated. Material is incorporated as
it exists on the effective date of this rule. Except for subsequent annual
publication of existing (unmodified) Code of Federal Regulation compilations,
any amendment or revision to a referenced document is not incorporated unless
and until this rule has been amended to specify the new dates.
***
(2) Incorporated materials:
***
(mmm) Section 113 of the Clean Air Act; contained in 42 USC 7413;
“Federal enforcement;” published January 19, 2004 in Supplement III of the
2000 Edition of the United States Code.
12
January Term, 2012
7413(e) noted that the section was rewritten to “identify explicitly a uniform set
of factors that both the court and the Administrator shall consider in determining
the appropriate amount of any penalty assessed under [the section].” S.Rep. No.
101-228, at 365 (1989), reprinted in 1990 U.S.C.C.A.N. 3385, 3748 (1990). The
report continued:
In addition, once the government * * * establishes a prima
facie case showing a violation of an ongoing nature, the burden of
proof would shift to the source to prove by a preponderance of the
evidence that it has cured the violation or that the violation was not
of a continuing nature and did not recur. Otherwise, and until the
date the source establishes that it has come into compliance, the
court should presume that the violation was continuous, and should
assess penalties for each day of that violation. This shift in the
burden of proof is appropriate because the source is in a better
position than EPA to establish its compliance status. In this
respect, the amendment overrules United States v. SCM Corp., 667
F. Supp. 1110 (D.Md.1987), in which the court refused to shift to
the source the burden of proving compliance after EPA established
that the source was in violation of the Act.
Id. at 336, reprinted in 1990 U.S.C.C.A.N. at 3749.
{¶ 32} In this case, the trial court’s approach to the continuing-violation
presumption and civil-penalty calculation was similar to that in the discredited
SCM Corp. decision. Accordingly, the appellate court properly rejected the trial
court’s conclusions and applied the federally established, and state-incorporated,
continuing-violation presumption. It correctly concluded that the trial court, to
ensure that the state’s air-pollution-control laws were construed consistently with
13
SUPREME COURT OF OHIO
the federal act’s provisions as required by R.C. 3704.02, should have considered
the permit violations as continuing until it was proved by the violator that a
particular plant was no longer in violation of its permit.
{¶ 33} Consequently, for the purposes of calculating the penalty for an
air-pollution-control violation, the state must (1) establish that there was a
violation of the permit requirements, (2) establish that the permit holder was
notified of the violation, and (3) make a “prima facie showing that the conduct or
events giving rise to the violation are likely to have continued or recurred past the
date of notice.” Section 7413(e)(2); see Ohio Adm.Code 3745-31-
01(AAAAAA)(2)(mmm). Establishing the foregoing gives rise to a rebuttable
presumption that the violation includes “the date of such notice and each and
every day thereafter until the violator establishes that continuous compliance has
been achieved” and that a penalty may be assessed for each day of violation. Id.
The violator may rebut this presumption and avoid the imposition of a penalty by
proving “by a preponderance of the evidence that there were intervening days
during which no violation occurred or that the violation was not continuing in
nature.” Id.
b. A Permit Violation and Notice of the Violation
{¶ 34} As to establishing a violation, it is undisputed, and Shelly has so
stipulated, that when the facilities failed the stack-testing requirement of the
permit, a mandatory and legally enforceable term of the permit was violated and
that violation is subject to the imposition of a civil penalty. R.C. 3704.05(C) and
3704.06; Section 7413(e). It is also undisputed that Shelly was given notice of the
permit violation.7 Section 7413(e).
7. The failure to pass a stack test is a different and independent permit violation from a permit
violation in which a facility has emitted in excess of the allowable limit set forth in its permit or
variance. This would be a violation of R.C. 3704.05(A) and (B). Compare State ex rel. Brown v.
Dayton Malleable, Inc., 1 Ohio St. 3d 151, 155, 438 N.E.2d 120 (1982) (in the analogous context
of water-pollution control, each term and condition of a permit is to be considered and given effect
14
January Term, 2012
c. The Prima Facie Showing
{¶ 35} We next consider the third element and whether the state made a
prima facie showing “that the conduct or events giving rise to the violation are
likely to have continued or recurred past the date of notice.” Section 7413(e)(2).
In light of Shelly’s stipulations, a reasonable inference arises that if a Shelly
facility failed the stack test on one day, and if no changes were made, it would fail
the same test on a subsequent day. Id. Conversely, it would be illogical to
conclude that without some change in the conditions or circumstances that
produced the failed stack test, continuous compliance with the permit terms had
been achieved.
{¶ 36} Therefore, when the state establishes that a permit holder failed to
pass the stack test required by its permit, as is the case here, a prima facie
showing is made that the violation is likely to continue. The burden of proof then
shifts to the permit holder to show that either continuous compliance has been
achieved or that some change in conditions has occurred to cause the violation not
to be a continuing one. Section 7413(e)(2). In this regard, Shelly’s reliance on
the Hoge Lumber and Thermal-Tron cases is inapposite. In Hoge Lumber, the
court determined that the prima facie presumption that the violation was of a
continuing nature applied because the defendant-polluter failed to provide any
contrary rebuttal evidence, and Thermal-Tron predates the 1993 amendments to
Ohio’s air-pollution-control statutes.8
d. Rebuttal Evidence
{¶ 37} Section 7413(e)(2) allows Shelly to rebut the presumption of a
continuing violation, and the state conceded this point at oral argument.
in determining whether a permit has been violated; whether the pollution-discharge limit was
improperly exceeded is only one part of the inquiry).
8. Hoge Lumber also involved permit violations that predated the 1993 amendments to Ohio’s air-
pollution-control statutes (of the eight violations, five were before 1993).
15
SUPREME COURT OF OHIO
However, the parties disagree on what evidence may be used to properly rebut the
continuing-violation presumption to mitigate the imposition of penalties. There is
no apparent dispute between the parties that the penalties ceased when the Shelly
facilities came back into compliance with their respective permits because they
obtained modified permits or variances or conducted subsequent stack testing
demonstrating that the facility was in compliance with permit requirements.
{¶ 38} The state contends, however, that Shelly could mitigate its
penalties by also offering rebuttal evidence that shows that the permit violation
was not of a continuing nature, with evidence such as days of nonoperation or
subsequent modifications to a facility. To the extent that Ohio’s air-pollution-
control policies incorporate the federal enforcement and penalty-calculation
provisions, we agree that the additional considerations of whether there were
intervening days during which the permit violation did not occur or that the
violation was not continuing in nature are “not limited to * * * evidence that is
based solely on the applicable test method in the State implementation or
regulation” and may include “evidence from continuous emission monitoring
systems, expert testimony, and bypassing and control equipment malfunctions,
even if these are not the applicable test methods.” S.Rep. No. 101-228 at 366,
reprinted in 1990 U.S.C.C.A.N. at 3749.
{¶ 39} Therefore, Shelly was not limited to presenting evidence that
showed successful compliance with a subsequent stack test to mitigate its penalty
for the permit violation. Rather, Shelly could have offered evidence that showed
that the permit violation was not of a continuing nature, such as evidence that the
operating conditions documented during the stack testing no longer existed, that
mechanical failures were repaired, that raw materials and fuels were changed, or
that Shelly scheduled retests.
16
January Term, 2012
{¶ 40} Shelly declined to present evidence of this character into the
record.9 Instead, Shelly presented what it calls a “normal operations defense.”
According to Shelly, because the operation of the Shelly facilities at maximum-
capacity for the stack test was only a snapshot of a plant’s emissions over the
course of a one-hour period using worst-case fuels and materials, the stack test did
not reflect the normal, daily operating conditions of Shelly’s facilities and, under
such normal operating conditions, the normal release of emissions. Shelly asserts
that because it does not normally operate any of its facilities under the conditions
required for the stack testing, the failed stack test cannot be used by the state to
demonstrate that the Shelly facilities were systemically out of compliance with
their respective permits—only that there was noncompliance on the day of the
test.
{¶ 41} Shelly’s normal-operations argument does have intuitive appeal:
that the operation of a facility at less than maximum capacity will result in the
emission of fewer pollutants. Nevertheless, Shelly’s normal-operations argument
does not provide any actual evidence that the emissions released while operating
normally are within the permit’s emission limit. The burden is on the violator to
prove by a preponderance of the evidence that there were intervening days on
which no violation occurred or that the violation was not continuing in nature.
Consequently, Shelly’s normal-operations argument, without more, does not show
how the permit violation was not of a continuing nature.
{¶ 42} Based on the foregoing, we cannot conclude that Shelly presented
sufficient evidence to rebut the application of a continuing-violation presumption.
9. Shelly implied at oral argument that it possessed this type of evidence but that it declined to
submit it, relying instead on its argument that the state bore the burden of proof to show that the
permit violation was of a continuing nature and on the testimonial evidence supporting its normal-
operations defense.
17
SUPREME COURT OF OHIO
IV. Conclusion
{¶ 43} We hold that the Shelly facilities were out of compliance with their
air-pollution-control permits, and thus subject to civil penalty, from the date on
which stack testing showed emissions in excess of the limits specified in the
permit until the permit holder demonstrated compliance with permit terms.
Accordingly, we conclude that the appellate court’s judgment remanding this
matter to the trial court for a recalculation of the civil penalty, within the trial
court’s sound discretion, was appropriate.
{¶ 44} Nonetheless, on the state’s invitation, we remand this matter to the
trial court for reopening of the record to allow Shelly the opportunity to identify
evidence that demonstrates that the permit violation was not a continuing
violation. At that time, Shelly may identify the rebuttal evidence that addresses
the actions taken by its facilities from the time when the facilities initially failed
to comply with that requirement and until the facilities came back into
compliance, either through a subsequent compliance-demonstrating stack test or
revised permits or variances, and Shelly may demonstrate that the violation of the
stack-test requirement was not of a continuing nature.
{¶ 45} The judgment of the court of appeals is affirmed, and the cause is
remanded for proceedings consistent with this opinion.
Judgment affirmed
and cause remanded.
O’CONNOR, C.J., and PFEIFER, LUNDBERG STRATTON, and MCGEE
BROWN, JJ., concur.
O’DONNELL and LANZINGER, JJ., dissent.
_________________
LANZINGER, J., dissenting.
{¶ 46} I respectfully dissent. By affirming the judgment of the Tenth
District Court of Appeals, holding that excessive air emissions occurring during a
18
January Term, 2012
stack test conducted at a facility’s maximum capacity establishes a presumption
that a continuing violation exists, the majority allows the state a lesser burden of
proof and disregards the defendants’ right to due process.
{¶ 47} After a lengthy trial and meticulous findings of fact, and as part of
the total enforcement penalty of $350,123.52, the trial court assessed a civil
penalty of $4,500 for Shelly’s admitted violations in the seventh claim for relief.
The court of appeals reversed without determining that the trial court’s
conclusions were against the manifest weight of the evidence. State ex rel. Ohio
Atty. Gen. v. Shelly Holding Co., 191 Ohio App. 3d 421, 2010-Ohio-6526, 946
N.E.2d 295. Shelly does not dispute that in 2002 and 2006, five of its facilities
violated the air-emissions levels set forth in their permits to install (“PTIs”)
during the time that stack tests measured them at maximum capacity. What
Shelly does contest is its ongoing liability for a “continuing violation” based on
the record of this case.
{¶ 48} I would accept Shelly’s argument that no continuing civil penalty
may be assessed because notwithstanding the excess pollutants that were emitted
on the day of testing, the state has not met its burden of proving that excess
pollutants were emitted every day for which a penalty is sought.
I. Legal Argument
A. The State Must Prove a Continuing Violation to Collect Ongoing Civil
Penalties
{¶ 49} As the majority explains it, the issue here is “how long the
violation continued in the interim period until Shelly demonstrated compliance
with the permit terms. Specifically, the issue is whether that violation may be
presumed to be continuing until Shelly rebuts the presumption with competent
evidence that a facility is either (1) not violating its permit or (2) not violating its
permit in a continuing manner.” Majority opinion at ¶ 22. In other words, is the
defendant liable for a civil penalty for a continuing violation?
19
SUPREME COURT OF OHIO
{¶ 50} This is a civil enforcement action. Ohio law requires the state to
show by a preponderance of the evidence that a violation of law actually occurred
for each day the state seeks a penalty or that an ongoing violation occurred before
the state can collect penalties for a continuing violation. Cincinnati, Hamilton &
Dayton Ry. v. Frye, 80 Ohio St. 289, 88 N.E. 642 (1909), paragraph two of the
syllabus (“In civil cases the jury deals only with probabilities, and the burden of
proof is ordinarily carried by a preponderance of the evidence”); Ohio Valley
Radiology Assocs. v. Ohio Valley Hosp. Assn., 28 Ohio St. 3d 118, 122, 502
N.E.2d 599 (1986) (“the sole responsibility of a defendant who has effectively
contested the claimant’s allegations by pleading is to refute the claimant’s case
after the latter has established a prima facie case by proper evidence” [emphasis
sic]).
{¶ 51} Even under 42 U.S.C. 7413(e)(2), the section of the Clean Air Act
that sets forth the standard for federal enforcement actions, the plaintiff must
make a prima facie showing that the conduct or events giving rise to the violation
are likely to have continued or recurred after the defendant has been notified of
the violation:
[W]here the Administrator or an air pollution control agency
has notified the source of the violation, and the plaintiff makes
a prima facie showing that the conduct or events giving rise to
the violation are likely to have continued or recurred past the
date of notice, the days of violation shall be presumed to
include the date of such notice and each and every day
thereafter until the violator establishes that continuous
compliance has been achieved, except to the extent that the
violator can prove by a preponderance of the evidence that there
20
January Term, 2012
were intervening days during which no violation occurred or
that the violation was not continuing in nature.
(Emphasis added.) 42 U.S.C. 7413(e)(2).
{¶ 52} In other words, in a federal enforcement action, there is no
presumption of a continuing permit violation unless a prima facie showing has
been made. The government carries the burden of making a prima facie showing
that the conduct or events giving rise to the violation are likely to have continued
each day. It is only after this prima facie showing is made that the defendant must
offer rebuttal evidence that a continuing violation has not occurred.
{¶ 53} A federal enforcement action brought under the Clean Air Act
offers guidance as to what a state could do to fulfill its own burden to prove a
violation under its own environmental laws. United States v. Hoge Lumber Co.,
N.D.Ohio No. 3:95 CV 7044, 1997 U.S. Dist. LEXIS 22359 (May 7, 1997). In
Hoge, the court found that a continuing violation had occurred based on
unrebutted evidence offered by the Department of Justice showing actual stack-
test exceedances (eight in all) plus (1) an affidavit from an expert engineer who
testified that the permit holder performed eight stack tests on its boiler under
various operational conditions, including operating conditions as low as 22
percent of capacity (i.e., not maximum operating capacity) and that all eight stack
tests showed emissions violations, (2) testimony by a company witness who
testified that the boiler was not operating in compliance with its air permit limits
and expressed doubt that the boiler could ever meet the emission limit required by
the air permit, and (3) evidence of actual days on which the defendant operated its
boiler in a manner exceeding emissions—700 days over a 12-year period.
{¶ 54} But here, in contrast, the state did not offer any evidence that “the
conduct or events giving rise to the violation are likely to have continued or
21
SUPREME COURT OF OHIO
recurred past the date of notice.” 42 U.S.C. 7413(e)(2). And the majority holds
that the state establishes a prima facie case with a single failed stack test.
{¶ 55} In another case dealing with the need for a PTI to control air
emissions, we stated:
Keeping in mind the purposes of R.C. Chapter 3704, we
must strive to reach a balance between promoting and enhancing
clean air and protecting and encouraging economic growth and
opportunities for the people of this state. This requires that
business entities not be subjected to an interminable task of dealing
with excessive regulation or requirements not explicitly covered by
statute or rule. Therefore, any uncertainty with regard to the
interpretation of R.C. Chapter 3704 and rules promulgated
thereunder should be construed in favor of the person or entity
(manufacturer or otherwise) affected by the law.
State ex rel. Celebrezze v. Natl. Lime & Stone Co., 68 Ohio St. 3d 377, 385, 627
N.E.2d 538 (1994). At the very least, the state must be held to its burden of proof.
B. One Failed Stack Test Does Not Prove a Continuing Violation
{¶ 56} Each of Shelly’s PTIs requires the facility to be operating within
the allowable levels of various pollutants as established for each facility. Part II,
Section A.1 of the individual permits sets forth both emissions limits per hour and
emissions limits per year. Each permit sets allowable levels of emissions for
certain classes of air pollutants. Part II, Section E.1 of the permits specifies the
testing methods that the plant must use to establish compliance. In Shelly’s case,
the use of a plant’s maximum operating capacity is a stated part of the testing
protocol. On testing day, facility emissions are tested when a plant is operating its
air-pollution sources at the maximum capacity possible. (“The test shall be
22
January Term, 2012
conducted while the emissions unit is operating at or near its maximum capacity
* * *.”) While the permit limits emissions both by hour and by year, the stack test
requires measurement of emissions only on a particular day.
{¶ 57} The majority treats this testing requirement as a separate permit
term. But the seventh claim for relief in the complaint against Shelly alleges air-
emission violations, not testing violations. There is no allegation that Shelly
violated the testing requirements themselves—the tests were done in accordance
with the maximum-capacity protocol set forth in the permit. Stated another way,
the permit does not mandate that Shelly’s plants operate at a constant maximum
capacity so as to support a presumption that emissions levels are continuously
being exceeded once an initial stack test has been failed.
{¶ 58} Shelly’s argument that a stack test does not represent normal
operating conditions at its facilities is compelling. Thus, on days when a facility
is not running at maximum capacity, it is possible that air emissions are within the
limit established in that facility’s PTI. In failing to show that the emissions
violations (appearing when the facility was running at maximum capacity) were
likely to continue, the state failed to present evidence to support the presumption
of a continuing air-emission violation that justified daily penalties.
{¶ 59} A civil penalty pursuant to R.C. 3704.06(C) was in order based
upon Shelly’s admitted violations of facilities named in the seventh claim for
relief. Nevertheless, the state offered no evidence beyond the single failed test to
show that a continuing violation existed beyond the dates of each failed stack test.
{¶ 60} The court of appeals’ opinion looked at a snapshot in time—stack
testing at maximum capacity—and created an irrebuttable presumption that the
company is continuously violating its permit until it shows that it can pass another
stack test, which realistically will not occur before at least 30 days after Shelly
gives the requisite notice to the Ohio Environmental Protection Agency,
according to Part II, Section E.1 of the permits. Even if this court applies the
23
SUPREME COURT OF OHIO
federal Clean Air Act’s prima facie burden-of-proof standard, as the state now
urges, the state still has the burden to show that the conduct or events giving rise
to the violation are likely to have continued or recurred. 42 U.S.C. 7413(e)(2).
II. Conclusion
{¶ 61} Civil penalties of up to $25,000 a day are significant deterrents to
environmental violations, and potential penalties should be imposed only for each
day that the state has proven a violation by a preponderance of the evidence.
{¶ 62} Because a continuing violation has not been proven in this case, I
would reverse the judgment of the court of appeals. I would hold that in a civil
action pursuant to R.C. 3704.06, the state must prove each day of violation for
which it seeks a civil penalty.
O’DONNELL, J., concurs in the foregoing opinion.
__________________
Michael DeWine, Attorney General, Alexandra T. Schimmer, Solicitor
General, and Gregg H. Bachmann and Gary L. Pasheilich, Assistant Attorneys
General, for appellee.
Bott Law Group, L.L.C., and April R. Bott; Chester, Wilcox & Saxbe,
L.L.P., and Sarah Morrison, for appellants Shelly Materials, Inc. and Allied
Corporation.
Brady, Coyle & Schmidt, Ltd., and Brian P. Barger, urging reversal for
amici curiae Ohio Chamber of Commerce, Ohio Aggregates and Industrial
Minerals Association, Flexible Pavements, Inc., Ohio Coal Association, Ohio
Contractors Association, and Associated General Contractors of Ohio.
________________________
24