In re Hunt
Appellants, owners ofrental property and a rental agent in Richmond, Virginia, contest an Initial Decision assessing an $84,224.80 penalty against them for violating the Toxic Substances Control Act ("TSCA"). The Administrative Law Judge ("ALJ") assessed the penalty based on Appellants' admitted failure to comply with regulations implementing section 1018 of the Residential Lead-Based Paint Hazard Reduction Act ("RLBPHRA) in connection with their rental of four single-family housing units in Richmond. These regulations, codified at 40 C.F.R. part 745, and entitled "Disclosure of Known Lead-Based Paint andlor Lead-Based Paint Hazards Upon Sale or Lease of Residential Property" (the "Disclosure Rule"), mandate that sellers and lessors of pre-1978 housing disclose to prospective purchasers and tenants information about the presence of lead-based paint hazards in such housing.
The specific violations that formed the basis of the Initial Decision involve the following Disclosure Rule requirements: (1) the obligation of lessors to include in the lease contract a statement disclosing the known presence of lead-based paint or leadbased paint hazards (40 C.F.R. § 745.1 13(b)(2)); (2) the obligation of lessors to provide lessees any available records or reports regarding the presence of lead-based paint or lead-based paint hazards (40 C.F.R. 4 745.107(a)(4)); (3) the obligation of lessors to provide lessees a list of records or reports regarding lead-based paint or lead-based paint hazards (40 C.F.R. 8 745.1 13(b)(3)); and (4) the obligation of leasing agents to ensure compliance with the Disclosure Rule (40 C.F.R. 4 745.115).
The Initial Decision arose from a 47-count administrative complaint in which the U.S. EPA Region 111 ("Region") alleged that Appellants had violated several Disclosure Rule requirements, including those above, in connection with the four subject properties. The Region subsequently reduced the number of alleged violations to 32 counts, and Appellants stipulated to liability for these violations. The Region sought a $120,088 penalty against Appellants based on these admitted violations.
In her Initial Decision, the ALJ reduced the penalty from the amount proposed by the Region to $84,224.80. The ALJ took into account Appellants' mitigation work in her evaluation of the TSCA statutory penalty factors of "extent, circumstances, and gravity" of the violations and "other matters as justice may require." The ALJ reduced the proposed penalty by 30% for three of the properties where she determined that Appellants had carried out lead-based paint remediation using a "Lead Block" product to encapsulate the lead. However, the ALJ did not reduce the penalty for the remaining property (the "Barton Avenue property") where she determined that Appellants had not provided sufficient evidence of remediation. In addition, the ALJ, following the applicable penalty policy for violations of section I018 of the RLBPHRA ("penalty policy"), granted Appellants a 10% deduction to reflect their "cooperation" and a 10% deduction in recognition of their "immediate good-faith efforts to comply" with the Disclosure Rule under the penalty policy's category of "attitude."
In their appeal, Appellants challenge what they considerto be the unreasonable size of the penalty imposed by the ALJ. In support oftheir appeal, Appellants assert that the ALJ committed the following errors in her penalty assessment:
(1) The ALJ refused to consider published case precedents for calculating a penalty in allegedly comparable lead-based paint violation cases.
(2) The ALJ ratified the Region's "unwarranted" multiplication of penalty charges against Appellants by assessing penalties on a lease-by-lease rather than property-by-property basis and separately charging Appellants for both failure to include a statement in the lease regarding the known presence of lead-based paint and associated hazards and failure to provide tenants with related available documentation.
(3)The ALJ failed to grant asubstantial penalty reduction based on Appellants' alleged remediation work at the subject properties. In particular, Appellants contest the ALJ's decision not to grant a penalty reduction for Appellants' alleged remediation of the "Barton Avenue" property. As to this property, Appellants argue that in not requiring the Region to demonstrate that Appellants had not conducted mitigation at the Barton Avenue property, the Region failed to adhere to the Board's decision in In re New Waterbury. L d , 5 E.A.D. 529 (EAB 1994), which, Appellants state, imposes on the Agency the burden of demonstrating the reasonableness of its penalty proposals.
(4)The ALJ did not grant Appellants more than a 20%penalty reduction under the penalty policy's category of "attitude."
(5) The ALJ did not reduce the penalty to reflect Appellants' lack of culpability.
Held: Appellants' appeal is denied in all respects, as explained below:
(1) The Board rejects as a matter of law Appellants' contentionthat the Board is bound by penalty assessments in previous TSCA cases in determining a penalty in the instant case. TheBoard's established jurisprudence runs strongly counterto this position.
(2) The Board affirms the ALJ's decision to impose a TSCA penalty on a lease-by-lease rather than property-by-property basis. The RLBPHRA and the Disclosure Rule impose disclosure obligations lease-by-lease and require disclosure through the independent vehicles of a statement and documentation. This reading of relevant requirements comports with the Disclosure Rule's purpose, which is to protect tenants, not property, and to provide information, including documentation, sufficient to allow prospective tenants to make an informed choice regarding whether to inhabit housing containing lead-based paint and to allow occupants of target housing to prevent exposure to lead hazards.
(3) The Board upholds the 30% downward penalty adjustment to reflect Appellants' remediation work at three of the subject properties, which the Region has not challenged. To the extent that Appellants argue for a larger deduction at these properties, the Board rejects that argument, finding that the ALJ took a measured approach in adjusting the penalty downward by 30%for these properties, taking into consideration evidence bearing on the effectiveness and limitations of lead encapsulation as remediation technique, as well as the lack of evidence that Appellants carried out recommended follow-up activities after encapsulation. With regard to the alleged remediation at the Barton Avenue property, Appellants' burden of proof argument is not supported by the Board's analysis in New Waterbury. Under New Waterbury, which applied the same TSCA penalty factors as the ones at issue in the present case, the Region's burden of proof is limited to showing that it considered the relevant statutory penalty factors and that its proposed penalty assessment is appropriate in light of those factors; however, the Region does not bear a specific burden as to any of these factors. Rather, where a respondent challenges the appropriateness of a proposed penalty by reference to a specific special circumstance that in the respondent's view warrants penalty mitigation under one of the generalized statutory penalty factors, respondent bears the burden of proving that the special circumstance in fact exists.
(4) The Board affirms the ALJ's penalty adjustment under the penalty policy's category of "attitude." The Board finds no abuse of discretion or clear error in the ALJ's decision not to grant hrther adjustments under this category. The Board has previously stated that when an ALJ assesses a penalty that falls within the range of penalties provided in the penalty guidelines, the Board will defer to an ALJ's judgment absent a showing that the ALJ has committed an abuse of discretion or a clear error in assessing the penalty—circumstances absent here. Indeed, Appellants do not merit an attitude based penalty reduction for their lead remediation work since Appellants conducted their work not voluntarily, but under the orders of a separate authority, the Richmond Department of Public Health.
(5) The Board upholds the ALJ's decision not to grant Appellants a penalty reduction based on their alleged lackof culpability. The record indicates that Appellants received actual notice of lead-based paint contamination at the four properties prior to leasing them. As such, the Board agrees with the ALJ that Appellants' failure to make the proper disclosures of known lead-based paint contamination evinces a disregard for their Disclosure Rule obligations.