Friends of the Earth v. Archer Daniels Midland Co.

No. 84-CV-413 (N.D.N.Y. July 19, 1990)

The court refuses to approve a consent decree in a citizen suit under the Federal Water Pollution Control Act (FWPCA) that provides for payments to three private conservation organizations. The court holds that FWPCA civil penalties do not have to be paid to the U.S. Treasury. Congress expressly provided that fines and penalties may be used to fund research, development, and other projects that further FWPCA goals. The court also holds that the $ 25,000 payable to the conservation organizations constitutes a civil penalty under the FWPCA. The defendant has not received any undeserved publicity from the payment to the conservation groups, since defendant is no longer operating the plant that is the subject of this suit. The court holds that the payments proposed by the decree do not have to be directly related to remedying the harm caused by defendants, especially since defendant has not been operating its plant since 1986. However, the court holds that the penalties should not be paid to private entities in this case. The court notes that payments to a state water pollution fund or environmental protection program would be acceptable.

Counsel for Plaintiff
Kathryn A. Bleecker
Squire, Sanders & Dempsey
1201 Pennsylvania Ave. NW, P.O. Box 407, Washington DC 20044
(202) 626-6600

Jan S. Kublick
Davoli, McMahon & Kublick
500 S. Salina St., Ste. 816, Syracuse NY 13202
(315) 424-1105

[20 ELR 21386]

Counsel for United States
David Drelich
U.S. Environmental Protection Agency
401 M St. SW, Washington DC 20460
(202) 382-2090

Charles J. Sheehan
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendants
Jean M. McCarroll
Berle, Kass & Case
45 Rockefeller Plaza, New York NY 10111
(212) 765-1800

McCurn, J.:

Opinion

Introduction

The United States has objected to a proposed consent decree entered into by the plaintiffs and the defendant as a settlement agreement in the plaintiff's suit against the defendant charging violations of the Federal Clean Water Act, 33 U.S.C. §§ 1251 et seq. The United States contends that the consent decree is invalid, because it does not include a civil penalty payable to the United States, and because its proposed payments to three conservation organizations are unrelated to the environmental harm done by the defendant. The plaintiffs argue that this court has broad discretion to approve consent decrees, that the proposed consent decree supports the purposes of the Clean Water Act, and that the agreement should therefore be approved.

Background

This action was commenced in 1984 by Friends of the Earth ("FOE"), the Atlantic States Legal Foundation, and Richard Fedele,pursuant to the citizen suit provision of the Federal Water Pollution Control Act ("Clean Water Act" or "CWA"), 33 U.S.C. § 1365(a). The plaintiffs alleged that the defendants Archer Daniels Midland Co. ("ADM"), Nabisco Brands, Inc., and the Clinton Corn Processing Co. violated their State Pollutant Discharge Elimination System ("SPDES") permit at their corn processing plant in Montezuma, New York.¹

In April 1986, ADM ceased its corn processing operations at the facility, and the court, by order dated July 20, 1988, ruled the action moot as to injunctive relief, although not as to civil penalties. On August 25, 1989, the parties submitted a proposed consent decree to the court, as well as to the U.S. Attorney General and the administrator of the Environmental Protection Agency, as required by 33 U.S.C. § 1365(c)(3).² The agreement provides that ADM will, within 30 days of the entry of the decree, pay $ 25,000 to three private environmental conservation organizations, as follows: $ 10,000 to the Isaak Walton League of America, $ 7,500 to the World Resources Institute, and $ 7,500 to Defenders of Wildlife. The defendant will also pay $ 125,000 to the plaintiffs for the costs of litigation, including attorneys' fees, expert witnesses' fees, and expenses. The decree does not take effect until approved by the court.

The United States has filed objections to the consent decree with the court. The government's basic objections are that the decree provides for no civil penalty payable to the United States, which the government contends is required under the Clean Water Act, and that the organizations which are to receive money under the decree do not perform projects related to the environmental harm done by the defendant. The plaintiffs and ADM argue, on the other hand, that payment of a civil penalty to the United States is not required in a consent decree, and that the agreement complies with the goals of the Clean Water Act to "restore and maintain the chemical, physical and biological integrity of the Nation's waters." 33 U.S.C. § 1251(a).

Discussion

"[A] federal court is not necessarily barred from entering a consent decree merely because the decree provides broader relief than the court could have awarded after a trial." Local Number 93, Int'l Assoc. of Firefighters, AFL-CIO v. City of Cleveland, 478 U.S. 501, 525, 106 S. Ct. 3063, 3077 (1986). This power is limited, however, by the premise that the parties may not agree to take action that conflicts with or violates the statute upon which the complaint was based. Local Number 93, 478 U.S. at 526, 106 S. Ct. at 3077. All of the parties support this limitation. United States' Objection, p. 3; FOE Response, p. 3; ADM Response, p. 5.

I. Civil Penalties as Required by the Clean Water Act

The government asserts that the proposed decree is defective because it fails to provide for civil penalties payable to the United States Treasury. It contends that failure to provide civil penalties is contrary to the intent of the CWA and that this court would violate the Local Number 93 standard if it were to grant the decree.

It is correct that civil penalties should be used to deter polluters who, faced with only the prospect of an injunctive order, would have little incentive to shun practices of dubious legality. Albemarle Paper Co. v. Moody, 422 U.S. 405, 417, 95 S. Ct. 2362, 2371 (1975). It is incorrect, however, for the government to assert that the proposed decree does not include any civil penalty.

The government is not clear in explaining why the $ 25,000 offered in this decree does not fall within the meaning of the term "civil penalty." It advances two arguments, however, in opposition to the proposed decree. Its first argument is that the proposed decree contains no civil penalty at all. It is the government's contention that because the payments will go to outside groups, they cannot be civil penalties because all civil penalties are payable to the United States Treasury. The government cites the original legislative history of the CWA to support its contention.³ The legislative history relied on by the government is not the most recent nor the most accurate, however. While it is true that Congress originally recognized that civil penalties would be deposited as miscellaneous receipts, it is also true that in its most recent amendments to the CWA⁴ the Congress stated:

In certain instances settlements of fines and penalties levied due to NPDES permit and other violations have been used to fund research, development and other related projects which further the goals of the Act. In these cases, the funds collected in connection with these violations were used to investigate pollution problems other than those leading to the violation. Settlements of this type preserve the punitive nature of enforcement actions while putting the funds collected to use on behalf of environmental protection. Although this practice has been used on a selective basis, the conferees encourage this procedure where appropriate.

H.R. Conf. Rep. No. 1004, 99th Cong., 2d Sess. 139 (1986). This statement can only lead this court to the conclusion that civil penalties may be used in a manner similar to that proposed. See Sierra Club, Inc. v. Electronic Controls Design, Inc., 703 F. Supp. 875, 877 [19 ELR 20713] (D. Or. 1989). In light of the clear legislative history, this court is not persuaded that all civil penalties under the CWA must be paid to the U.S. Treasury.j⁵

Equally unpersuasive are the government's interpretations of the Supreme Court decisions it cites. The Court in Middlesex County Sewerage Auth. v. National Sea Clammers Ass'n, 453 U.S. 1, 101 S. Ct. 2615 [11 ELR 20684] (1981), was not addressing the issue of civil penalties and the case was decided several years before the 1987 amendments to the CWA were issued. The Court did not [20 ELR 21387] specifically state, nor can it be inferred from the language of the decision, that civil penalties were to be paid only to the Treasury. Additionally, in Gwaltney of Smithfield v. Chesapeake Bay Found., Inc., 484 U.S. 49, 108 S. Ct. 376 [18 ELR 20142] (1987), the Court did not state, as the Government claims, that all civil penalties under the CWA are payable to the Treasury. Like Middlesex County, the Court was not addressing this specific issue nor making a specific interpretation of Section 1365(a) as it pertains to remedies.⁶

In connection with their assertion that no civil penalty exists in the proposed decree, the government cites the Environmental Protection Agency's Clean Water Act Penalty Policy (Policy) as requiring a "substantial" penalty in all settlements. This court does not find the Settlement Policy binding.⁷ Even if it was, the court could not say that the proposed settlement does not contain such a penalty. See Pennsylvania Envtl. Defense Found. v. Bellafonte Borough, 718 F. Supp. 431 [20 ELR 20286] (M.D. Pa. 1989).⁸

The government's second argument is that because the $ 25,000 is being paid to outside conservation groups, ADM may receive undeserved publicity as an environmental philanthropist and avoid the payment of a penalty. It argues that if the defendants will receive some benefit from the payment, then the payments obviously cannot be a penalty. This argument fails for an obvious reason:

ADM will not receive any "business advantages" or "publicity boons," as the government terms them, because ADM is no longer operating in Montezuma.

II. Requirement of a Relationship Between Civil Penalty Payments and the Harm Caused

The government also asserts that the consent decree is invalid because the proposed payments are not directly related to remedying the harm caused by ADM. It bases the validity of this claim on the EPA Settlement Policy and the legislative intent accompanying the Water Quality Act of 1987. See supra note 4 and accompanying text. In this assertion the government has confused two very different issues. As stated before, the EPA Settlement Policy is not binding on this court. See supra note 7. Assuming arguendo that it is binding, the policy does not address the type of payment proposed by this decree. The Settlement Policy is concerned with efforts made by violators to mitigate potential penalties.⁹ As the proposed consent decree indicates, these payments are intended to serve not as mitigation projects, but as the penalty to ADM for their violations of the CWA.¹⁰

On the other hand, the legislative intent makes it clear that fines and penalties may be used for "other related projects which further the goals of the Act." See supra p. 5. This characterization more accurately describes the payments proposed by this consent decree. For this reason, this court finds that the payments proposed by this consent decree do not have to be directly related to remedying the harm caused by the defendants.¹¹

III. Payment of Civil Penalties to Private Entities

Although this court has held that civil penalties do not have to be paid to the U.S. Treasury and that the payments proposed in this case do not have to be directly related to the harm caused by the defendants, this does not mean that the penalties in the proposed consent decree may be paid to private persons. This is established in the legislative intent of the original CWA. See supra p. 5 and note 3. As the decree is structured now, the penalties take the form of payments to private entities.¹²

There is some support for the government's position that penalties may never be paid to private entities. On the other hand, the court recognizes that the payment of penalties to environmental groups selected by the parties in a consent decree would benefit the environment. This court is convinced that a middle ground best furthers the purposes of the Clean Water Act here.

If the penalties were paid to a state water pollution fund or environmental protection program, they would fulfill their role as deterrents while still furthering the goals of the CWA. See Sierra Club, 703 F. Supp. 879 (noting that the primary reason for civil penalties is to deter water pollution and that such a result would be obtained if payments were given to the Oregon Water Quality Program); NRDC v. Pennsylvania Elec. Co., Civ. Nos. 87-0512 & 87-0513 (W.D. Pa. Aug. 25, 1987) (as cited in Sierra Club, 703 F. Supp. at 878); Powell Duffryn, 720 F. Supp. at 1168 (noting an "affirmative obligation to direct . . . [penalties] to ameliorate environmental pollution"). This would also insure that the funds would be used to maintain or improve the environment in the New York state area, while preventing their use for private interests, about which the government expresses concern. This compromise should satisfy the government's desire for a deterrent and for a positive effect on the environment. Similarly, it will satisfy the plaintiff's desire to have the penalties put to use in a manner which benefits the environment.

This court, therefore, denies approval of the consent decree in its current form. The court observes that a revision of the proposed decree in a manner consistent with the Sierra Club holding would provide an appropriate settlement, taking into account the intent of the CWA.

1. Defendants Nabisco Brands, Inc. and Clinton Corn Processing Co. have previously been dismissed as parties to the suit. Thus the only remaining defendant is ADM.

2. Title 33, U.S.C. § 1365(c)(3), titled "Protection of the interests of the United States," provides:

Whenever any action is brought under this section in a court of the United States, the plaintiff shall serve a copy of the complaint on the Attorney General and the Administrator. No consent judgment shall be entered in an action in which the United States is not a party prior to 45 days following the receipt of a copy of the proposed consent judgment by the Attorney General and the Administrator.

3. "It should be noted that any penalties imposed would be deposited as miscellaneous receipts and not recovered by the complainant." 1972 U.S. Code Cong. & Admin. News 3668, 3745.

4. Water Quality Act of 1987, Pub. L. No. 100-4, 1987 U.S. Code Cong. & Admin. News (101 Stat.) 7.

5. Additionally, the court finds persuasive the language of the Powell Duffryn case cited by the defendant. "Paid into the public coffers, the penalties lose their identity and indeed, in all likelihood, will be used for other purposes." PIRG v. Powell Duffryn Terminals, Inc., 720 F. Supp. 1158, 1168 [20 ELR 20152] (D.N.J. 1989).

6. The Middlesex County court was addressing whether an implied right of action was present in the Federal Water Pollution Control Act. The Government relies on only a footnote. Middlesex County, 453 U.S. 1, 14, 101 S. Ct. 2615, 2623. The Gwaltney Court was addressing the standing of a CWA claim based solely on past violations. Gwaltney, 484 U.S. at 56, 108 S. Ct. at 377.

7. The government's reliance on Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837, 104 S. Ct. 2778 [14 ELR 20507] (1984), is misplaced. As the defendants correctly point out, the issue in Chevron was the administration of a statutory scheme, not policy guidelines. The guidelines also affirm this interpretation: "The policies and procedures set out in this document are intended solely for the guidance of government personnel. They are not intended and cannot be relied upon to create any rights, substantive, or procedural, enforceable by any party in litigation with the United States." Penalty Policy, 8. Similarly, Tull v. U.S., 481 U.S. 412, 107 S. Ct. 1831 [17 ELR 20667] (1987) is not controlling. The Court there noted the application of the policy, and its accompanying legislative intent, to the determination of a suitable penalty. This court has not been called upon to fashion a remedy, because the parties have offered a consent decree.

8. "The United States recognizes in its comments regarding the proposed consent decree that the Environmental Protection Agency's Penalty Policy is not binding on this Court." Pennsylvania Envtl. Defense Found., 718 F. Supp. at 437.

9. Mitigation projects allow for "the reduction of a civil penalty assessment." Policy, p. 6. "The activity is most likely to be an acceptable basis for mitigating penalties if it closely addresses the environmental effects of the defendant's violation." Policy, p. 7 (emphasis added). This statement makes it unclear whether the mitigation project must absolutely address the environmental effects of the violation.

10. The consent decree states, "WHEREAS, plaintiffs and defendant, by their authorized representatives and without trial or final adjudication of the issues of fact or law with respect to plaintiffs' remaining claims, consent to the entry of this Consent Decree (Decree) to resolve all of plaintiffs' remaining claims against defendant, including the civil penalties for all violations which occurred from June 12, 1982, to the present . . .;" Consent Decree at p. 2. Section III of the decree is also entitled "CIVIL PAYMENT" and expresses the parties' recognition of 33 U.S.C. § 1319 in arriving at a penalty amount. Consent Decree at p. 4.

11. This is not to imply that every civil penalty payment, agreed upon in a consent decree, may be unrelated to the harm done by the defendant. Our decision here is based solely on the facts at hand, most significantly, that ADM has not been operating its corn processing plant since April 1986.

12. In Sierra Club, the court did not approve of a consent decree which included payments to the Sierra Club Legal Defense Fund, which in turn would disburse the funds to private, nonprofit environmental organizations. As the plaintiffs admit, at p. 13 of their brief, the court stated that "civil penalties may be used to directly fund public, as opposed to private, environmental protection projects." See Sierra Club, 703 F. Supp. at 879. Although the payments proposed in this case are not being made directly to the plaintiffs, the underlying nature of the settlement is for the $ 25,000 to be distributed to organizations that they have selected, similar to the plan in Sierra Club.