21 ELR 21073 | Environmental Law Reporter | copyright © 1991 | All rights reserved

United States v. Roll Coater, Inc.

No. IP 89-828 C (S.D. Ind. March 22, 1991)

The court holds that a company in the business of coil coating must pay a $ 2,093,750 civil penalty for violations of pretreatment standards under the Federal Water Pollution Control Act (FWPCA). The court first holds that FWPCA § 309(a)(3) does not prevent the government from bringing a civil action for past violations after it ordered the defendant to comply with pretreatment standards in the future. A contrary reading is plainly inconsistent with the strong enforcement policy of the Act. The court further holds that the government's delay in notifying the defendant of violations and bringing suit for those violations does not bar recovery under the doctrine of equitable estoppel or laches. The court calculates the maximum statutory penalty for the defendant's violations from the first date that the defendant could have reasonably known that its satisfaction of state requirements did not satisfy the Environmental Protection Agency. Reducing this amount to take account of mitigating factors, the court holds that the defendant's violations are not serious, because no damage to the environment was proven, and that the defendant demonstrated good faith by making several interim improvements to the existing facilityand delaying construction in [21 ELR 21074] order to develop new technology. The court holds that the resulting penalty will not have a detrimental economic impact on the defendant's business, but is larger than the estimated economic benefit to the defendant of noncompliance. Finally, the court holds that it lacks equitable jurisdiction to order the penalty to be paid to entities other than the U.S. Treasury, because the government's claim for injunctive relief has been dismissed.

Counsel for Plaintiff
Michael J. McNulty
Environmental Enforcement Section
U.S. Department of Justice, P.O. Box 7611, Ben Franklin Station, Washington DC 20044
(202) 514-2000

Counsel for Defendant
Renee R. McDermott, John M. Kyle III, Anthony C. Sullivan
Barnes & Thornburg
1313 Merchants Bank Bldg., 11 S. Meridian St., Indianapolis IN 46204
(317) 638-1313

McKinney, J.:

Order Following Bench Trial

This action was tried to the Court from December 17 through 19, 1990. The Court, having reviewed all admitted evidence, makes the following findings of fact and conclusions of law.

I. Findings of Fact

This dispute concerns the United States Environmental Protection Agency ("USEPA"), and Roll Coater, Inc. ("Roll Coater"). Roll Coater paints rolls of raw metal in preparation for further manufacturing by other companies. This process is commonly known as coil coating. The gist of the complaint is that Roll Coater emitted unsatisfactorily treated effluent into the City of Greenfield's wastewater system. The United States seeks to use its influence to increase its affluence due to this effluent.

This action is brought pursuant to the Clean Water Act, 33 U.S.C. § 1311, et seq. (the "Act"), and the National Categorical Pretreatment Standards promulgated thereunder ("pretreatment standards"), 40 C.F.R. § 465. The appropriate penalty for violation of the Act is determined by § 309(d), 33 U.S.C. § 1319(d).

Section 307(d) of the Act, 33 U.S.C. § 1317(d), states that no person shall violate any pretreatment standard after its effective date. The pretreatment standards for coil coating were promulgated on December 1, 1982, and required compliance by December 1, 1985. The standards are subdivided into four categories: steel basis materials, aluminum basis materials, galvanized basis materials, and cans. 40 C.F.R. § 465, Subparts A, B, C, and D. Each of these subcategories contains different discharge standards for pollutants. Because Roll Coater coats steel, aluminum, and galvanized materials, it is subject to subparts A, B, and C. It is undisputed that Roll Coater did not achieve compliance with the pretreatment standards from June 1986 until July 1989, when it completed a new wastewater treatment facility.1

Other factual findings are presented in subsequent sections of this Order, and will not be repeated here.

II. Conclusions of Law

A. Liability

Because the Act is a strict liability statute, a discussion of liability, after the Court has found a violation, would seem unnecessary. However, Roll Coater has raised issues of liability which must be addressed.

1. Compliance "or" Civil Action

First Roll Coater argues that because it was ordered to comply with the regulations, USEPA cannot bring a civil action for past violations. The Act provides that the administrator "shall issue an order requiring such person to comply or he shall bring a civil action." 33 U.S.C. § 1319(a)(3) (emphasis added). Roll Coater argues that the plain meaning of the disjunctive "or" controls, and that if USEPA requires compliance, a civil action cannot be filed. Although the Seventh Circuit has not interpreted this section of the Act, other circuits provide guidance. Colby v. J.C. Penney Co., Inc., 811 F.2d 1119, 1123 (7th Cir. 1987); Richards v. Local 134. Int'l Brotherhood of Electrical Workers, 790 F.2d 633, 636 (7th Cir. 1986) (district Court should give "respectful consideration" to the decisions of other circuits when no Seventh Circuit authority is on point). Certainly, Roll Coater is correct if this Court gives effect to the statute as written.

However, Roll Coater is not correct when it terms orders to comply with the Act and civil actions as redundant and unnecessary. The obvious result of its reading is that if USEPA chooses to bring suit, it could not order future compliance with the Act. Certainly both a penalty for past damage and future compliance is necessary. Moreover, if its reading is adopted, when the USEPA orders compliance, violators would be rewarded by the forgiving of all prior noncompliance. This reading is plainly inconsistent with the strong enforcement policy of the Act. Therefore, this Court holds that the USEPA is not limited to one remedy and may seek both penalties for past violations and prevention of future violations. See United States v. Earth Sciences, Inc., 599 F.2d 368, 375-76 [9 ELR 20542] (10th Cir. 1979) (rejecting argument the EPA is limited to only one remedy).

2. Equitable Estoppel

Roll Coater's second argument is that the United States is estopped from bring [sic] this civil action. The doctrine of equitable estoppel states that when one party relies to its detriment upon the material omissions of another, justice demands that the malfeasor be estopped from bringing claims against the injured party that it might otherwise assert. Portmann v. United States, 674 F.2d 1155 (7th Cir. 1982). Certainly the government may be estopped from asserting claims against parties that it has wronged. Id. at 1167.

However, in this case, equitable principles are more applicable to the issue of damages than the issue of liability. The Clean Water Act is a strict liability statute, and liability ensues if there is a violation. USEPA's failure to contact Roll Coater does not provide sufficient justification to ignore the statute. In contrast, USEPA's failure to enunciate the involvement of the various levels of government is important in determining the appropriate penalty. See infra discussion concerning mitigation of damages.

3. Laches

Roll Coater's third argument that it is not liable for violations of the Act is that the equitable doctrine of laches bars recovery. The basis of the doctrine is that equity aids the vigilant and not those who slumber on their rights. See National Legal Defense & Education Fund. Inc., 753 F.2d 131, 137 (7th Cir.), cert. denied, 472 U.S. 1021 (1985).

Roll Coater states that delay in bringing suit significantly increased its liability exposure. The Seventh Circuit has held that prejudice "arises when a defendant adjusts its position in a manner that would not have occurred if the plaintiff had not delayed. . . . Laches applies to protect a defendant not only from diminished likelihood of success on the merits at trial, but also from unfairly accentuated damages occasioned only by a plaintiff's unreasonable delays." Zelazny v. Lyno, 853 F.2d 540, 543-44 (7th Cir. 1988) (emphasis omitted). Without expressly stating, Roll Coater is arguing that it could have completed the treatment plant much earlier if the federal government had ordered compliance. Otherwise, delay by USEPA would not have increased its liability exposure. No allegations were made that the treatment facility actually completed was inadequate due to inaction by USEPA. This increase in liability exposure is not enough for this Court to completely bar recovery. Delay in seeking compliance is considered in determining the appropriate penalty.

B. Penalty

In determining the appropriate penalty, first, the statutory maximum penalty must be determined. Second, the Court reduces the penalty in accordance with factors indicated by Congress. The Court must clearly indicate the weight given to each of the factors and the factual findings that support its conclusion. Atlantic States Legal [21 ELR 21075] Foundation, Inc. v. Tyson Foods, Inc., 897 F.2d 1128, 1142 [20 ELR 20788] (11th Cir. 1990).

1. Maximum Penalty

When the Act is violated, a penalty is mandated. Section 309(d), 33 U.S.C. § 1319(d), provides:

Any person who violates section 301, 302, 306, 307, 308, 318, or 405 of the Act, . . . shall be subject to a civil penalty of not to exceed $ 25,000 per day for each violation.2

The Court calculates the statutory maximum penalty for the proven violations to be $ 52,945,000.3 In calculating the statutory maximum, each monthly violation constitutes a violation for each day of that month. Atlantic States Legal Foundation, Inc. v. Tyson Foods, Inc., 897 F.2d 1128, 1139-40 [20 ELR 20788] (11th Cir. 1990).

2. Mitigation Factors

Certainly Congress intended to provide a substantial deterrent effect by including § 309(d); however, Congress also included mitigating factors.

In determining the amount of a civil penalty the court shall consider the seriousness of the violation or violations, the economic benefit (if any) resulting from the violation, any history of such violations, any good-faith efforts to comply with the applicable requirements, the economic impact of the penalty on the violator, and such other matters as justice may require.

33 U.S.C. § 1319(d). Additionally, the Court must consider that the purpose of a civil penalty under the Act is threefold: retribution, deterrence, and restitution. Tull v. United States, 481 U.S. 412, 422 (1987).

a. Seriousness of Violations

The first factor to be considered is the seriousness of the violations. Roll Coater's violations were undeniably quite considerable. Uncontradicted evidence presented at trial indicated that for the vast majority of time, Roll Coater exceeded applicable average monthly limits by more than one thousand percent. (Witschonke affidavit).

However, large violations do not necessarily mandate that a Court cannot reduce the maximum penalty. The parties stipulated that USEPA sampled Brandywine Creek in March 1990 (the creek into which Greenfield's public owned treatment works ("POTW") discharges) and found no evidence of environmental harm traceable to Roll Coater. The United States argues that this Court should accept, without evidence, that all violations involving toxic pollutants are serious. Certainly lack of damage is not a defense to liability in an action under the Act, but it is a mitigating factor as to damages. In the criminal law, one who attempts to kill, but through pure chance only injures a person, is punished less severely than a person who is successful in completing the act. Similarly, in this situation, Roll Coater's effluent may not have caused damage to the environment due to the actions of Greenfield's POTW, and not its own actions; however, this lack of damage is still a mitigating factor.4

The United States argues that when Congress abandoned harm to the environment as the basis of the federal water control program in 1972, Congress also abandoned lack of harm as a mitigating factor. However, as the United States points out, water quality was dropped as the standard because of substantial problems in enforcement. One of the purposes of the new technology-based effluent limitations was "to avoid the necessity of lengthy fact finding, investigations, and negotiations at the time of enforcement." S. Rep. No. 414, 92d Cong., 1st Sess. 65 (1971). Clearly, completion of an environmental impact study every time the federal government attempted to regulate an individual company would be ponderous if required to find liability. However, considering harm at the damage stage of litigation places the issue of environmental harm on the defense. Lengthy fact finding, investigations, and negotiations are appropriate in high stakes litigation. The change of the standard in determining liability does not foreclose considering lack of harm as a mitigating factor. As used in the Act, "serious" means more than the amount of pollutant over that authorized by the regulations.

b. Economic Benefit

Pursuant to § 309(d) of the Act, this Court must next consider its economic benefit to Roll Coater. resulting from the non-compliance. The implication of including this factor is that unless the company is fined an amount at least as great as the economic gain in not complying with the regulations, the statute serves little deterrent value. However, other factors may decrease the imposed penalty below the calculated economic benefit.

As is always true for an issue of this type, the Court is faced with "duelling" experts. The United States' expert calculated the economic benefit of the avoided and delayed expenditures as $ 1,473,736. Predictably, the defendant determined the economic value to be much smaller. Roll Coater's expert testified that the economic benefit of non-compliance was between $ 631,173 and $ 778,907.5 Due to the many differences in the procedures used, the Court is left to swim, or at least tread water, in this most muddy pool. A Court may not merely determine that one expert was more credible, but must examine the differences between the procedures used.

Three primary differences between the two methods accounted for the vast majority of the discrepancy. This Court will not address the many other variables as they are insignificant. The first difference was the discount factor applied. Second, the beginning date of non-compliance varied from December 1, 1985, to June 1, 1986. Third, the United States considered total costs of the new facility and Roll Coater did not consider costs not necessary for compliance with the Act.

The United States used a discount factor of 16 percent. This factor was based on a capital asset pricing model which considers what a person should gain on an investment of average risk. Roll Coater used a discount factor of 10.84 percent. This discount factor was calculated by the weighted average costs of capital method. This method concentrates on the return for a given industry and does not look at investments in general. Because Roll Coater should not be punished for not investing its capital in other industries, the Court holds that Roll Coater's discount factor of 10.84 percent is applicable in this situation.

The second major reason for the difference is that the beginning date of non-compliance varied from December 1, 1985, to June 1, 1986. The United States used December 1, 1985, and Roll Coater used June 1, 1986. Roll Coater used June 1, 1986, because that is the date the United States first presents evidence of non-compliance. See calculation of maximum penalty above. The United States used December 1, 1985, because that is the effective date of the Act. Although both positions can be defended, it is unjust to penalize Roll Coater in determining economic benefit due to delayed compliance for a time period not considered by the United States when it calculated the [21 ELR 21076] maximum statutory penalty. Therefore, June 1, 1986, is the applicable non-compliance date.

The final significant discrepancy in the two calculations is that the United States considered total costs of the new facility and Roll Coater did not consider costs not necessary for compliance with the Act. The Court will not undertake the timeconsuming process of listing all items which should be considered as necessary for compliance. It should be sufficient to note that a company should not be penalized for building more than the Act requires. Under the approach of the United States, the larger the new plant, the greater the economic benefit due to delayed compliance. Under the approach of Roll Coater, a company is only penalized for the facility they were mandated to build. Roll Coater's approach is more sound, and therefore, the Court adopts Roll Coater's procedure.6

In summary, the Court accepts the method and model used by Roll Coater for all three major discrepancies. Roll Coater calculated its economic benefit to be between $ 631,173 and $ 778,907. The Court accepts these figures for determination of the final penalty.

c. History of Violations

The United States argues that Roll Coater is a "recidivist" violator and should be severely punished. Certainly, the United States has carried its burden in proving that Roll Coater violated the Act from 1986 through 1989. In PIRG v. Powell Duffryn Terminals, Inc., 720 F. Supp. 1158, 1163 [20 ELR 20152] (D.N.J. 1989), reversed on other grounds, 913 F.2d 64 [20 ELR 21216] (3d Cir. 1990), the district court interpreted "any history of such violations" to include continuing violations. However, this Court reads "any history of such violations" in § 309(d) of the Act to refer to previous violations not related to the instant litigation, and not a continuing violation. Continuing violations are adequately considered in the calculation of the maximum penalty, and in assessing the seriousness of the violation and good faith efforts to comply. A "recidivist" offender is one who has been caught and punished. Roll Coater does not have a history of violations because it has not been found guilty of a violation previous to the one at bar.

Even though Roll Coater is not a recidivist, the Court will not mitigate the penalty due to this factor. Roll Coater is not a first time offender who was surprised by the violation. Evidence presented at trial indicated that, while Roll Coater was unable to accurately determine the appropriate limits, Roll Coater was aware that it would probably be in violation. The maximum penalty punishes continuing violations and good faith mitigates the penalty after a violation. The "history of such violations" factor considers the time frame before a violation. Even though Roll Coater had not been found guilty of a previous violation, it was aware that it would probably be in violation. Therefore, the Court will not mitigate the maximum penalty due to this factor.

d. Good Faith Efforts to Comply and Such Other Matters as Justice May Require

Most of the effort at trial was spent addressing the factors of good faith and justice. The gist of the United States' argument is that USEPA promulgated the Act on December 1, 1982; Roll Coater read the Act in early January 1983; and accordingly, Roll Coater is responsible for adhering to the Act's compliance date of December 1, 1985. The United States' position is that the federal program was separate from any state program, and any involvement of the State of Indiana is not relevant to the issue at bar. In terms of liability, the United States is correct; however, for determining the proper penalty, the Court will consider evidence of the difficulty of compliance and the actions of the State of Indiana. See United States v. Edison Co., 725 F. Supp. 928, 933 (N.D. Ohio 1989) (good faith adherence to Ohio EPA's directives and guidance as well as possible lack of effective communication between the Ohio EPA and the United States EPA mitigates against a substantial penalty).

In terms of difficulty of compliance, Roll Coater presents evidence that USEPA was sending mixed signals to private companies affected by the Act. Until spring 1983, several high ranking USEPA officials commented that the Act may be significantly changed in the near future and that compliance with certain aspects would no longer be required. Statements such as these would inhibit a private company from spending large sums of money on treatment facilities.

On February 3, 1984, William Ruckelshaus, then USEPA Administrator, established the Pretreatment Implementation Review Task Force ("PIRT") to provide recommendations of the day-to-day problems faced in implementing the pretreatment program. PIRT's charter was as follows:

The common implementation problems experienced by industry, States and municipalities will be examined and options for program improvement developed and debated. The need for guidance, training programs, technical assistance, and policy for interpretation will be the focus of activity.

PIRT's final report was not published until eleven months before the effective date of the pretreatment standards. Additionally, guidance documents mandated by the PIRT Report were not published until September 1985, just three months before the effective date. Because of the complex nature of determining site-specific discharge limitations for the Roll Coater plant, these guidance documents were reasonably necessary to ensure proper application of the standards. Roll Coater could not have known, with any degree of certainty, what mass-based limits applied to its plant until it received a determination by the State in May 1986.

Roll Coater argues that it made a good faith effort to comply even after May, 1986, because it thought that if it complied with the state program, it was also complying with the federal program. In fact, Roll Coater began the process of designing a facility in conjunction with dictates from the State. Roll Coater presented uncontradicted evidence that USEPA did not suggest until August 30, 1988, that it had a role to play in the compliance process or that Indiana was not the exclusive governmental entity in charge of pretreatment obligations. This first contact was in the form of an administrative order issued to Roll Coater. Prior to the issue of the administrative order, the State of Indiana conducted all routine inspections of Roll Coater's wastewater treatment plant. Thus, it was reasonable for Roll Coater to believe that complying with Indiana's directives was all that was required. USEPA counters that it never said it did not have a role to play. This lack of communication is sufficient to allow this Court to not penalize Roll Coater for violations before August 30, 1988.

This is not a simply a case of USEPA failing to diligently prosecute a violation. Certainly, when the USEPA and the defendant are in communication and the USEPA does not bring suit, the delay is not a basis for reduction of the penalty. This is just because the defendant knows it must satisfy the USEPA and it is the defendant's responsibility to do so. See Public Interest Research of N.J., Inc. v. Powell Duffryn Terminals. Inc. 913 F.2d 64, 81 [20 ELR 21216] (3d Cir. 1990) (where USEPA and defendant are corresponding, delay in bringing suit will not reduce the penalty unless the USEPA has excused the noncompliance).

In this case, Indiana recognized and excused the noncompliance. Roll Coater complied with the State's directives in seeking to remedy its problems. Without setting out the lengthy history of the interplay between the State and Roll Coater relating to the construction of a new treatment facility, it is significant that no evidence at trial suggested that Indiana was dissatisfied with the actions of Roll Coater. Roll Coater, in good faith, relied on Indiana's directives. Now, USEPA seeks to impose liability notwithstanding Indiana's agreement to a compliance schedule. Because Roll Coater reasonably and in good faith relied on the requirements set by Indiana, a penalty will not be imposed until after Roll Coater became aware of USEPA's involvement on August 30, 1988.

Roll Coater maintains that it acted in good faith in delaying construction of the treatment facility, and hence, not complying with the pretreatment standards even after August 30, 1988. The most persuasive of its arguments is that prior to installing expensive oil separation and sand filter technologies at the Greenfield facility, Roll Coater installed and evaluated them at another facility. Certainly it makes economic sense to test new technology at one plant before installing the new technology at other plants. While testing the new technology, Roll Coater made several interim improvements to its existing Greenfield facility. As these interim measures were costly and [21 ELR 21077] only contributed to pollution control, not production, they evidence good faith. Thus, Roll Coater acted in good faith in delaying construction of the facility even after August 30, 1988.

e. Economic Impact on Violator

No evidence was admitted at trial that indicated a large civil fine would have a material adverse effect on the operation of Roll Coater. Therefore, the Court will not reduce the civil penalty imposed on Roll Coater due to its economic impact.

3. Penalty Imposed

Based on the § 309(d), 33 U.S.C. § 1319(d), factors discussed above, Roll Coater is entitled to substantial mitigation of the maximum statutory penalty. First, until May 1986, Roll Coater could not have reasonably determined what levels applied to its plant. A period of eighteen months is needed to design and construct a treatment facility. Thus, Roll Coater could not have complied before October 1987. Justice requires that Roll Coater not be penalized for any violations before August 30, 1988, because it could not have reasonably known that satisfaction of state requirements did not satisfy the USEPA. Using August 30, 1988, as the first date a penalty could be imposed, the maximum penalty is recalculated to be $ 16,750,000.7

Second, while Roll Coater's violations were numerous, there was no proven damage to the environment, and hence, the violations were not serious within the meaning of the Act. The purpose of the Act is to prevent pollution of the nation's waterways. Roll Coater did not pollute a waterway, and the Act's purpose has not been defeated. However, Roll Coater did violate the Act and some penalty is required. A reduction in the penalty of less than 50 percent due to the lack of damage would not adequately represent that preventing harm to the environment is the purpose of the Act. A reduction of more than 50 percent would not preserve the deterrent effect upon others desired by Congress, and would not recognize the seriousness of any violation of the Act indicated by the strict liability structure of the Act. Thus, the lack of damage reduces the penalty by 50 percent.

Third, even after August 30, 1988, Roll Coater demonstrated good faith by making several interim improvements to the existing facility and delaying construction in order to develop new technology. Prior to installing expensive oil separation and sand filter technologies at the Greenfield plant, Roll Coater tested the procedure at another plant. While testing this new technology, Roll Coater, in conjunction with the State of Indiana, improved the treatment capabilities of the Greenfield facility. The interim improvements at the Greenfield plant provided no economic benefit to Roll Coater because they had no effect on production. Roll Coater acted in a reasonable manner in delaying construction until it could build a treatment facility that would utilize the latest technology, not just adequate technology. Good faith must be rewarded at a level sufficient to justify these interim measures, otherwise a company will chose to just accept the future penalty. While the reduction in the penalty imposed should not necessarily be a quid pro quo for the interim measures, the acts of Roll Coater indicate its good faith in working with the State of Indiana and the Court will reduce the penalty by an additional 75 percent. A smaller reduction would not adequately represent the significant measures taken by Roll Coater, and a larger reduction would overlook the fact that Roll Coater was still emitting unsatisfactorily treated effluent. Because Roll Coater failed to prove that a large penalty would have a detrimental economic impact, this factor does not mitigate the final penalty imposed. Also, the Court will not mitigate the penalty due to the lack of a history of violations. After all mitigation, the penalty is $ 2,093,750.8

The economic benefit resulting from the violation suggests that Roll Coater should be subject to a large penalty. As calculated above, Roll Coater benefitted by an amount between $ 631,173 and $ 778,907 in delaying compliance with the federal regulations. Because the penalty after all mitigation is larger than the estimated economic benefit, and therefore will serve as a deterrent and a punishment, the final penalty imposed will not be increased. After considering the above factors, the Court finds that Roll Coater is subject to a civil penalty of $ 2,093,750.

4. Remedy

The final issue is whether penalties must be paid to the United States Treasury or whether other remedies are allowable. The United States argues that all civil penalties assessed pursuant to the Act must be paid to the Treasury. Roll Coater counters that the Court could, in the exercise of its equitable jurisdiction, allow other forms of restitution. Both statements are correct.

The Act does not specify where civil penalties are to be paid. However, for citizen suits, the legislative history makes clear that Congress intended that the penalties be paid to the Treasury. S. Rep. No. 414, 92d Cong., 2d Sess. 133; 31 U.S.C. § 3302(c)(1). The majority of courts have consistently followed the legislative intent that in citizen suits, civil penalties must be paid to the Treasury.9 Gwaltney of Smithfield v. Chesapeake Bay Foundation, Inc., 484 U.S. 49, 53 [18 ELR 20142] (1987); Middlesex County Sewerage Authority v. National Sea Clammers Ass'n, 453 U.S. 1, 14 n.25 [11 ELR 20684] (1981); Public Interest Research of N.J. Inc. v. Powell Duffryn Terminals, Inc., 913 F.2d 64, 82 [20 ELR 21216] (3d Cir. 1990). The issue of whether other remedies are available when the United States brings the action and judgment is rendered is a question of first impression.

First, Roll Coater argues that Congress intended that fines be directed to other projects. In support of its position, Roll Coater points out that in the Conference Report on the 1987 Clean Water Act amendments concerning government enforcement actions, Congress encouraged the resolution of enforcement suits by directing penalties toward research and other related projects:

In certain instances settlements of fines and penalties levied due to NPDES permit and other violations have been used to find 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 the 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. Rep. No. 1004, 99th Cong., 2d Sess. 139 (1986) (emphasis in original). This quotation is consistent with prior case law concerning consent to settlements and does not strongly support Roll Coater's position. The statement concerns "settlements of this type," not judgments. As previously pointed out, courts already allow other remedies in settlements because of their contractual nature. Because this Court is concerned with a judgment, the above quotation is of little value.

While this Court can understand an aversion to depositing civil penalties in the Treasury as not the most effective way to fight environmental problems, this Court is uncomfortable deciding environmental policy. A district court is not equipped to determine the best way to attack pollution problems in a given area. Roll Coater has asked this Court to sanction a specific research project. The Court does not have the means nor expertise to determine the likelihood of success of a particular research project. Additionally, Roll Coater has asked this Court to contribute toward the creation of a Center for Environmental Responsibility to house the Pollution Prevention Institute authorized by the Indiana General Assembly. A federal court should not be making a decision as to whether a state program should be funded.

Roll Coater argues that the Court could allow other remedies through its equitable jurisdiction when ordering injunctive relief. This is true. Under the Act, a court may fashion injunctive relief requiring a defendant to pay monies to other entities, if there is a nexus between [21 ELR 21078] the harm and the remedy. But, once labeled as a civil penalty, the money must be paid to the Treasury. Powell Duffryn, 913 F.2d at 82. On July 12, 1990, the parties stipulated that the United States' claim for injunctive relief be dismissed without prejudice. Thus, even if the Court were to agree with Roll Coater on this point, without this claim for injunctive relief, the Court lacks equitable jurisdiction to grant Roll Coater's request for an alternative remedy.

Roll Coater further states that this Court can order payment of money to entities other than the Treasury as long as the payment is not characterized as a civil penalty.The Court is at a loss for another characterization other than an injunction or a civil penalty. Any such payment is not a voluntary contribution after judgment. Therefore, for all the reasons set out above, Roll Coater must pay the imposed penalty to the United States Treasury and no other relief will be granted.

III. Conclusion

In summary, the Court holds that defendant, Roll Coater, must pay $ 2,093,750 to the United States Treasury. Roll Coater failed to comply with regulations concerning pretreatment of effluent before its release into the City of Greenfield's sanitary sewer system. Roll Coater's violations were quite numerous and a significant penalty is warranted. However, several factors contribute to a sizable reduction from the statutory maximum.

IT IS SO ORDERED this 22 day of March, 1991.

1. The United States argues that Roll Coater has been in violation since December 1, 1985. However, the United States has failed to enter into evidence any Monthly Monitoring Reports ("MMR"), or other evidence that Roll Coater was in violation before June 1986. Although it is extremely unlikely that Roll Coater was in compliance between these dates, the United States has the burden of proof, and the Court holds that it has failed to carry its burden as to any possible violation occurring before June 1986.

2. Prior to amendment in 1987, § 309(d) provided that violators would be subject to a civil penalty not to exceed $ 10,000 per day of such violation. Thus, each violation prior to February 4, 1987, is subject to a $ 10,000 penalty, and each violation after February 4, 1987 is subject to a $ 25,000 penalty.

3. Chromium

6/1/86-2/3/87 — 8 months of violations of the monthly average constitutes 248 separate violations; 248 X $ 10,000 = $ 2,480,000.

2/4/87-9/30/89 — 30 months of violations of the monthly average constitutes 908 separateviolations (July and August 1989 excluded); 908 X $ 25,000 $ 22,700,000.


6/1/86-2/3/87 — 8 months of violations of the monthly average constitutes 248 separate violations; 248 X $ 10,000 = $ 2,480,000.

2/4/87-9/30/89 — 30 months of violations of the monthly average constitutes 908 separate violations (July and August 1989 excluded); 908 X $ 25,000 $ 22,700,000.


6/1/86-2/3/87 — 1 month of violations of the monthly average constitutes 31 separate violations; 31 X $ 10,000 = $ 310,000.

2/4/87-9/30/89 — 3 months of violations of the monthly average constitutes 91 separate violations; 91 X $ 25,000 = $ 2,275,000.

4. In Public Interest Research of N.J., Inc. v. Powell Duffryn Terminals Inc., 913 F.2d 64, 79 (3d Cir. 1990), the Third Circuit upheld the district court's finding that violations were serious without a particularized showing of harm. However, Powell Duffryn concerned direct runoff and the case at bar concerns effluent that will be treated at a POTW. In the former situation, nothing could prevent the toxic chemicals from entering the waterway. In the latter situation, the POTW interceded and it is quite possible that toxic chemicals never entered the stream. Thus, harm cannot be assumed based on a violation of the regulations.

5. On January 14, 1991, Roll Coater filed a motion to reopen the record and admit additional testimony. This motion was denied. By affidavit, Roll Coater attempted to introduce evidence that its estimate of economic benefit should be reduced to between $ 464,691 and $ 575,709. As is made clear in subsequent discussion, any reduction in Roll Coater's economic benefit would not reduce the final penalty imposed.

6. Roll Coater should not misunderstand this acceptance of their method to include all of the items it considered nonessential. For example, the Court considers interior drywall and paint essential to a building and should be include in the costs of compliance. Certainly, Roll Coater is correct not to include increased capacity, a lab not used for treatment of effluent, and even landscaping. The Court accepts Roll Coater's estimation because any difference in the final figure caused by these changes is inconsequential.

7. Chromium

8/30/88-9/30/89 — 11 months of violations of the monthly average constitutes 335 separate violations (July and August 1989 excluded); 335 X $ 25,0000 $ 8,375,000.


8/30/88-9/30/89 — 11 months of violations of the monthly average constitutes 335 separate violations (July and August 1989 excluded); 335 X $ 25,000 $ 8,375,000.


8/30/88-9/30/88 — no violations.

8. 0.5 [0.25 ($ 16,750,000)] = $ = $ 2,093,750

9. The Act's prohibition against ordering the defendant to make payments to organizations other than the Treasury does not extend to settlement whereby the defendant does not admit liability and the court is not ordering nonconsensual monetary relief. Sierra Club, Inc. v. Electronic Controls Design, Inc., 909 F.2d 1350, 1354 (9th Cir. 1990).

21 ELR 21073 | Environmental Law Reporter | copyright © 1991 | All rights reserved