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In re Peace Industry Group

12/22/2016
Case Number:CAA Appeal No. 16-01
ELR Citation:47 ELR 41395

This case arises from an enforcement action that EPA’s Air Enforcement Division (“Enforcement Division”) brought against two Chinese corporations for Clean Act violations involving mobile sources. CAA §§ 202-19, 42 U.S.C. §§ 7521-54.

Following the corporations’ failure to file prehearing exchanges of information, Administrative Law Judge M. Lisa Buschmann (“ALJ”) issued a Default Order and Initial Decision against them. Although the ALJ found that the Enforcement Division failed to properly serve the complaint, she held that any defect in service was waived because the Chinese corporations had each filed answers to the complaint. The ALJ adopted without change the penalty the Enforcement Division proposed – using the applicable mobile source penalty policy – and assessed a total penalty of $1,574,203 – $525,988 against both corporations jointly and severally, and $1,048,215 against one of the corporations individually.

Upon examination of the Default Order and the administrative record, the Board elected to exercise its sua sponte review authority under 40 C.F.R. §§ 22.27(c), .30(b), because the ALJ failed to ensure that this substantial penalty was consistent with the “record of the proceeding or the Act,” 40 C.F.R. § 22.17(c), and therefore “appropriate.” Id. § 22.24(a). Although the Enforcement Division advised the ALJ that it was proposing a penalty following the applicable mobile source penalty policy, the Board’s review of the record indicated that the Division had failed to provide, and the ALJ had failed to request, certain information critical to determining the proposed penalty under the policy. The Board also elected to exercise sua sponte review because of significant concerns that the ALJ may have applied an incorrect standard for determining whether the Enforcement Division had properly served the two Chinese corporations with the complaint. Although the Enforcement Division served the complaint by certified mail, return receipt requested, on the corporations’ agent at the address of record, the ALJ concluded that service was not effective because the return receipt was signed by someone other than the agent.

As a result of the Board’s exercise of its sua sponte review authority, the Enforcement Division submitted a brief which provided the Board with the missing information needed to determine the penalty under the mobile source penalty policy. And in doing so, the Enforcement Division found it had erred – by approximately $88,000 – in its earlier calculation and proposed to reduce the penalty accordingly. On the issue of service, the Enforcement Division argued that it properly served the corporations with the complaint. The Chinese corporations did not file a reply.

Held: (1) With the additional explanation and information provided by the Enforcement Division as a result of the Board’s exercise of sua sponte review, the Board is now able to determine that the penalty, as modified to account for the Division’s error, is consistent with the record of the proceeding, the Act, and the mobile source penalty policy, and is therefore appropriate. Accordingly, the Board is now assessing a penalty on both corporations jointly and severally of $525,988, and an additional penalty of $959,594 against one of the corporations individually. In future matters, the Board expects that the Enforcement Division will provide the ALJ and the public with the information necessary to demonstrate that a proposed penalty is appropriate for the alleged violations. The Board further expects that the ALJ will not simply accept the Agency’s proposed penalty but will ensure that the Agency’s explanation is sufficient and, where information is lacking, require the Agency to supplement the record.

(2) The ALJ erred in determining that the Enforcement Division had not properly served the complaint. Contrary to the decision below, the Board finds that the Division properly served the two Chinese corporations with the complaint by addressing and mailing the complaint by certified mail, return receipt requested, to the designated agent at the address of record. The fact that someone else at the address of record signed the return receipt is immaterial. To the extent that any ALJ or Regional Judicial Officer decisions conflict with the Board’s determination on this issue, the Board’s decision is controlling.

(3) Because the Board finds that the Division properly served the complaint on the Chinese corporations, the Board does not address the ALJ’s determination that the corporations waived any defect in service by filing answers to the complaint. In all other respects, the Board affirms the Default Order and Initial Decision.