Civil and Criminal Environmental
Enforcement
Eighteenth Annual ELI Boot Camp
Course on Environmental Law
November 11, 2009
Barry M. Hartman, Esq.
barry.hartman@klgates.com
Christopher R. Tate, Esq.
christopher.tate@klgates.com
www.klgates.com
Why Worry About Environmental
Enforcement?
ƒ Profits
ƒ Publicity
ƒ Prison/Penalties
2
Profits
$$$$$$$$$$
3
Profits
Criminal Sentencing: Disgorgement of Profits
Civil Enforcement: Economic Benefit of
Noncompliance
4
Publicity
5
Publicity
ƒ 10/05/09
Southern Union Co. Fine $18 Million For Illegal
Mercury Storage in Rhode Island
ƒ 09/03/09
President of Pesticide Firm Sentenced to Prison
for Illegal Discharges to Sewers
ƒ 08/17/09
Ship Operator to Pay $10 Million to Settle Criminal
Charges in San Francisco Bay Spill
ƒ 07/28/09
Court Orders Spanish Company to Pay $2 Million
Fine in Ocean Dumping Case
ƒ 07/16/09
San Francisco Area Tank Farm Must Pay $2.5
Million in Settlement for False Reports
6
Publicity
ƒ
02/20/07
Rhode Island Freight Firm Pleads Guilty To
Illegal Transportation of Chemicals
ƒ
04/07/06
California Charges Central Valley Firm, Employees
With Faking Air Quality Tests
ƒ
05/08/06
Texas Gambling Ship Owner Fined $300,000 For
Obstructing Pollution Investigation
ƒ
07/27/06
Worker Endangerment Initiative Survives First
Test in Environmental Crimes Trial
ƒ
12/1/06
Electric Utility Agrees to Pay $9.25 Million In
Settlement Over Clean Air Act Charges
7
Publicity
ƒ
11/17/05
N.C. Surveyor Pleads Guilty to Charges Of
Falsifying Wetlands Delineation Maps
ƒ
12/07/05
Gulf Coast Developer, Others Sentenced To
Prison, Fined $5.3 Million in Wetlands Case
ƒ
01/17/06
Grand Jury Indicts San Diego Energy Utility
For Improper Asbestos Removal From Pipes
8
Prison
9
EPA Criminal Enforcement Program
FY 2004 – FY 2008
450
400
350
300
250
2004
2005
2006
2007
2008
200
150
100
50
0
N u m b er O f
C ases
In it ia t e d
N u m b er of
D e fe n d a n ts
C h a rg e d
S e n te n c e s
(Y e a rs )
F in e s ( $ M il ,
In f l a t io n
A d ju s te d )
10
Kinds of Criminal Offenses
Misdemeanors < 1 yr
Felonies > 1 yr
11
Kinds of Criminal Offenses
ƒ 1984
ƒ 1986
ƒ 1987
ƒ 1990
ƒ 20??
ƒ 20??
RCRA felonies
CERCLA felonies
Clean Water Act misdemeanors and
felonies
Clean Air Act felonies
TSCA felonies
OSHA felonies
12
Criminal Offenses = Knowledge
ƒ What statute is being used?
ƒ Is the charge a misdemeanor or
a felony?
ƒ What specific standard is alleged to be violated?
ƒ What court are you in?
13
Factors Shaping the “Knowledge” Element
ƒ Public Welfare Doctrine
ƒ Responsible Corporate Officer Doctrine
ƒ “Knowing” vs “Willful”
ƒ Due Process Concerns
14
Public Welfare Doctrine
ƒ U.S. v. Balint, 258 U.S. 250 (1922)
ƒ Narcotics Act contained no “knowledge” element
ƒ Misdemeanor
ƒ Achieving social betterment rather than punishing
‘mala in se’ conduct allows elimination of common
law ‘knowledge’ element without offending due
process
15
Public Welfare Doctrine
ƒ U.S. v. International Minerals and Chemicals Corp.,
402 U.S. 558 (1971)
ƒ Transporting hazardous chemicals without classifying
on shipping papers
ƒ Statute contained ‘knowledge element” (knowingly
violates regulations….”)
ƒ Misdemeanor
ƒ Presumption (vs. elimination) of knowledge from
character of materials
16
Public Welfare Doctrine
ƒ U.S. v. International Minerals and Chemicals Corp.,
402 U.S. 558 (1971)
“…where dangerous or deleterious devices or
products or obnoxious waste materials are involved,
the probability of regulation is so great that anyone
who is aware that he is in possession of them or
dealing with them must be presumed to be aware of
the regulation.”
402 U.S. 558,at 565.
17
Public Welfare Doctrine
Guns
ƒ United States v. Staples, 511 U.S. 600 (1994)
ƒ guns in general are not "deleterious devices or products or
obnoxious waste materials… that put their owners on notice that
they stand in responsible relation to a public danger…”
ƒ “In contrast to the selling of dangerous drugs or the possession
of hand grenades, private ownership of guns in this country has
enjoyed a long tradition of being entirely lawful conduct.”
ƒ defendant had to know that it was an automatic gun before
being subject to possibly 10 years in prison.
18
Public Welfare Doctrine
Asbestos
ƒ United States v. Weintraub, 273 F.3d 139 (2nd Cir.
2001)
ƒ Real estate developer convicted of knowingly violating the CAA
(asbestos handling).
ƒ Held: need only prove defendant knew substance involved was
asbestos; need not know it was ‘friable’.
ƒ “no reasonable person at this late date could claim to be
unaware that asbestos is severely regulated and its
handling is fraught with legal risk.” Id. at 151.
19
Public Welfare Doctrine
ƒ Asbestos was first used legally for its fire retardant
properties for over a century and when used properly is
no danger at all
ƒ It was first regulated due to dangers of removal in the
late 1970’s
ƒ Same as guns?
20
Public Welfare Doctrine
ƒ Evolution of relaxation of “Knowledge” element
inherently dangerous product/activity regardless of
regulatory history allows inference of knowledge
long history of non regulation regardless of danger of product/activity
precludes inference of knowledge
short history of regulation regardless of danger of product/activity allows
inference of knowledge
public welfare legislation without more allows inference of knowledge
21
“Responsible Corporate Officer” Doctrine
ƒ Officers strictly and vicariously liable for environmental
violations caused by employee of corporation- what
must they know?
ƒ United States v. Dotterweich, 320 U.S. 277 (1943)
ƒ person who was otherwise innocent, but who stood in
“responsible relation to the public danger” is responsible
ƒ Premised on “public welfare” character of legislation
ƒ No knowledge requirement in statute (FFDCA)
ƒ Misdemeanor
22
The “Knowledge” Element and
The “Responsible Corporate Officer” Doctrine
ƒ
United States v. Dipentino, 242
F.3d 1090 (9th Cir. 2001)
ƒ on-site representative of
company hired to oversee
removal of asbestos knowingly
violated CAA when he was:
(1) present at site on daily basis;
(2) performed inspections of
relevant areas;
(3) prepared/signed final
inspection reports certifying
abatement complete; and
(4) had power to stop the
contractor’s work for improper
performance.
ƒ
United States v. Self, 2 F.3d
1071, 1088 (10th Cir. 1993)
ƒ conviction of president sustained
evidence sufficient to allow jury
to infer that defendant knew of
illegal storage of hazardous
waste.
23
The “Knowledge” Element and
The “Responsible Corporate Officer” Doctrine
ƒ United States v. McDonald &
Watson, 933 F.2d 35 (1st Cir.
1991)
ƒ Defendant (president) must
have actual knowledge of
some facts
ƒ No mandatory presumption
of knowledge from position
ƒ
United States v. Hansen,
262 F.3d 1217 (11th Cir. 2001)
ƒ Defendant has responsible
relationship to violationunder his authority
ƒ Power or capacity to
prevent violation
ƒ Acted knowingly in failing
to prevent, detect or
correct violation
24
What must you “know” to
knowingly violate the law”?
ƒ Must you know what your permit requires?
ƒ Must you know what the law is?
ƒ Must you know the acts that constitute the violation of
law?
ƒ Must you know the conditions that constitute the violation
of law?
25
Language of the Statute
Knowingly violate a provision
v.
Knowingly engage in conduct in
violation of a provision
26
Language of the Statute
ƒ
Clean Air Act (42 U.S.C. § 7413(c):
(i) Any person who knowingly violates a requirement … of … 42 U.S.C. §
7413(c)(1);
ƒ
Clean Water Act, 33 U.S.C. § 1319(c):
(1) Any person who negligently violates sections …, 33 U.S.C. § 1319(c)(1)(A);
(2) Any person who knowingly violates sections …, 33 U.S.C. § 1319(c)(2)(A);
ƒ
RCRA, 42 U.S.C. § 6928(d)
(1)
Any person who knowingly transports … hazardous waste, listed under this
subchapter to a facility which does not have a permit …, 42 U.S.C.
§ 6928(d)(1);
(2)
Any person who knowingly treats, stores, or disposes of any hazardous waste
identified or
listed …, 42 U.S.C. § 6928(c)(2)
(a) without a permit, or
(b) In knowing violation of material condition.
ƒ
CERCLA, 42 U.S.C. § 9603(b)
(i) Any person who fails to notify immediately the appropriate agency….
27
RCRA: How far does ‘Knowing” travel?
ƒ United States v. Johnson & Towers, Inc.,
741 F.2d 662 (3d Cir.1984).
ƒ “it is unlikely that Congress could have intended to subject to
criminal prosecution those persons who acted when no permit
had been obtained irrespective of their knowledge under
subsection (A), but not those persons who acted in violation of
the terms of a permit unless that action was knowing
(subsection (B)). Thus, we are led to conclude that the
omission of the word “knowing” in (A) was inadvertent or
that “knowingly” which introduces subsection (2) applies to
subsection (A).”
28
RCRA: How far does ‘Knowing” travel?
On the other hand….
ƒ United States v. Hoflin, 880 F.2d 1033
(9th Cir. 1989)
ƒ “Had Congress intended knowledge of the lack of a
permit under subsection (A) it could have easily said
so. It specifically inserted a knowledge element in
subsection (b) and did so notwithstanding the
“knowingly” modifier which introduces subsection (2)
In the face of such obvious Congressional action
we will not write something into the statute that
Congress so plainly left out.”
29
RCRA: “Knowledge” jury instruction
ƒ That Defendant knowingly disposed of or commanded
and caused others to dispose of chemical wastes on or
about …;
ƒ That Defendant knew that the chemical wastes had the
potential to be harmful to others or to the environment,
or in other words, it was not an innocuous substance like
water;
ƒ The wastes were listed or identified by the United States
Environmental Protection Agency ("EPA") as a
hazardous waste pursuant to RCRA;
ƒ The defendant had not obtained a permit from either
EPA or the State authorizing the disposal under RCRA.
30
RCRA: “Knowledge”
ƒ United States v. Dee, 912 F.2d 741
(4th Cir. 1990) [RCRA]
ƒ “… the knowledge element does extend to
knowledge of the general hazardous character of the
wastes. But the government does not have to show
that Defendants knew the chemicals were
characterized as hazardous under the law…”
ƒ “ You need only to find that the defendant knew (1)
the waste had potential to be harmful to the
environment (2) the defendant knew the waste was
not an innocuous substance.” Id. at 1181.
31
Conscious Disregard – (Jury Instruction)
ƒ “deliberately closed his eyes to what would
otherwise have been obvious to him”
ƒ “failing to investigate if he is in possession of
facts which cry out for investigation”
32
Bad Facts Make Bad Law
ƒ United States v. Dean, 969 F.2d 187
(6th Cir. 1992) [RCRA]
ƒ Defendant said that he had read the RCRA
waste code “but thought it was a bunch of
bullshit.”
33
RCRA: “Knowledge”
ƒ United States v. Jo Miller, 484 F. Supp.2d 154 (D.
Me. 2007)
ƒ Government did not have to show that the defendant
knew of the requirements of RCRA or even that the
materials being transported were regulated
hazardous waste.
ƒ Even if the defendant relied on another’s
representation that the company was in compliance
with the law, she can still be found in violation of
RCRA.
34
RCRA: “Knowledge”
ƒ United States v. Elias, 1999 U.S. Dist. LEXIS 21372
(D. Idaho)
ƒ If defendant thought the substance disposed of was
benign, he did not “knowingly dispose of a hazardous
substance” (mistake of fact)
35
Summary of RCRA “knowledge”
ƒ Aware of facts/conduct that are the basis for the
violation (the storage, discharge or emission);
ƒ Knowledge that the material is a pollutant/waste
might be harmful;
ƒ Mistake of fact defense.
36
Clean Water Act “Knowledge”
ƒ United States v. Hopkins, 53 F.3d 533 (2nd Cir. 1995)
ƒ Congress intended to punish the defendant who knowingly
commits a proscribed act, "even if the defendant was not aware
of the proscription." The court also considered International
Minerals as well as other public welfare offense cases.
ƒ The government was only required to prove that the defendant
knew the nature of his acts and performed them intentionally;
not that he knew his acts violated the statute or permit.
37
Clean Water Act “Knowledge”
ƒ United States v. Wilson, 133 F.3d 251 (4th Cir.
1997)
ƒ “…does not require the government to show that the
defendant knew that permits were available or
required. …it…, preserves the availability of a
mistake of defense if the defendant has something
he mistakenly believed to be a permit to make the
discharges for which he is being prosecuted.”
38
Clean Water Act “Knowledge”
ƒ United States v. Ahmad, 101 F.3d 386 (5th Cir.
1996)
ƒ Government has to prove that the defendant knew he
was discharging gasoline.
ƒ gasoline vs. guns: What about “public welfare”
exception?
39
Clean Water Act “Knowledge”
ƒ United States v. Weitzenhoff, 35 F.3d 1275
(9th Cir.1993)
ƒ does not require the polluter to know of the existence
of the permit but only that the polluter knowingly
engaged in conduct that results in a permit violation.
40
Corporate “Knowledge”
CORPORATION
FACT F
FACT H
FACT G
GENERAL COUNSEL VP OPERATIONS
VP ENVIRONMENT
FACT D
FACT C
REGIONAL MANAGER
PLANT MANAGER
FACT B
EMPLOYEE
FACT A
EMPLOYEE
41
Clean Water Act “Negligence”
ƒ United States v. Hanousek, 176 F.3d 1116
(9th Cir.1999), cert denied, 528 U.S. 1102 (2000)
ƒ Clean Water Act requires only “ordinary” negligence (i.e.,
civil definition), not “gross” or “criminal” negligence (i.e.,
involuntary manslaughter definition)
ƒ Criminal sanctions for ordinary negligence do not violate
Due Process where statute is a public welfare statute
ƒ Thomas, J., dissent from denial of certiorari
ƒ Concern that Hanousek will affect ordinary
industrial activities
42
Clean Water Act “Negligence”: U.S. v. Cota
43
Clean Water Act “Negligence”
ƒ United States v. Cota, 2008 U.S. Dist. LEXIS 65911
ƒ District Court applied Hanousek to an oil spill from a
containership in the San Francisco Bay
ƒ Held that CWA is a “public welfare” statute, and
therefore criminalizes ordinary civil negligence
ƒ Rejected argument that heightened or gross
negligence should apply to defendant’s conduct
ƒ Defendant pled guilty pursuant to an agreement
44
The Double Standard for Knowledge
Under the Clean Air Act
Senior Management
Liable for
Knowing Violations
Rank and File Employees
Liable for
Knowing and Willful
Violations
45
The Double Standard for Knowledge
Under the Clean Air Act (cont.)
ƒ United States v. Metalite, 51 ERC 1950 (D. Ind.
2000)
ƒ “The generally accepted understanding of "willful"
versus "knowing" in the criminal law context is that
"willfulness" requires an act in conscious disregard
of a known duty, whereas "knowingly" designates a
lack of mistake or accident and an awareness of
actions that make up a violation of the law, without
knowing that one's acts were prohibited by law.
46
Conscious Disregard – (Jury Instruction)
(cont.)
ƒ “circumstantial evidence may be used, including
evidence that the defendant took affirmative
steps to shield himself from relevant
information”
47
48
Due Process and “Knowledge”
ƒ United States v. Engler, 806 F.2d 425 (3rd Cir.
1986)
ƒ Felony statute is not necessarily rendered
unconstitutional because it lacks a knowledge
element.
ƒ The due process clause may set some limits on the
imposition of strict criminal liability, but it has not set
forth definite guidelines as to what those limits might
be.
49
Due Process and “Knowledge”
ƒ Lambert v. California, 355 U.S. 225, 228, (1957)
ƒ "We do not go with Blackstone in saying that a
'vicious will' is necessary to constitute a crime . . . for
conduct alone without regard to the intent of the doer
is often sufficient. There is wide latitude in the
lawmakers to declare an offense and to exclude
elements of knowledge and diligence from its
definition."
50
Due Process and “Knowledge”
ƒ United States v. Wulff, 758 F.2d 1121 (6th Cir.
1985)
ƒ Applying the Migratory Bird Treaty Act without a
scienter requirement would be unconstitutional,
because the crime is not one known to the common
law, and because the felony penalty provision is
severe and would result in irreparable damage to
one's reputation.
51
Factors Shaping the “Knowledge” Element
ƒ Public Welfare Doctrine
ƒ Responsible Corporate Officer Doctrine
ƒ “Knowing” vs “Willful”
ƒ Due Process Concerns
52
Two More Thoughts
ƒ Audits;
ƒ “Independent counsel” investigations
53
EPA Voluntary Disclosure Programs
FY 2002 – FY 2006
Number of Companies Disclosing & Correcting
Violations
Voluntary Disclosures Resolved
Voluntary Disclosures Initiated
1,600
1,600
1,487
1,475
1,467
1,400
1,400
1,223
1,200
1,032
1,000
927
Companies
Facilities
800
600
627
614
541
500
491
379
400
Total Count
Total Count
1,200
969
1,000
1,002
848
Companies
Facilities
800
600
511
512
551
460
400
252
200
200
0
0
FY
02
FY
03
FY
04
FY
05
FY
06
FY
02
FY
03
FY
04
FY
05
FY
06
Source: Data Source: Integrated Compliance Information System (ICIS), October 28, 2006; data source for previous fiscal years: annual ICIS data
54
Title 18 Offenses
ƒ False Statements
ƒ Obstruction of Justice
ƒ Conspiracy
ƒ Conspiracy to Defraud an Agency of the United
States
ƒ Aiding and abetting
ƒ Accessory after the fact
55
Conspiracy
ƒ Existence of agreement to achieve unlawful
objective
ƒ Knowing and voluntary participation
ƒ Overt act in furtherance
56
Conspiracy (cont.)
ƒ Agreement to operate a plant
ƒ Knowledge that there are environmental issues at
the plant subject to regulations
United States v. Hansen (11th Cir).
57
Federal Sentencing Guidelines
58
Base Level Offenses Factors
ƒ Offenses involving “knowing endangerment” of
others;
ƒ Offenses involving mishandling of hazardous or
toxic substances or pesticides (including related
recordkeeping offenses);
ƒ Offenses involving mishandling of “other” (nontoxic)
pollutants (including related recordkeeping
offenses);
59
Base Level Offenses Factors (cont.)
ƒ Offenses involving public water systems;
ƒ Offenses involving hazardous or injurious devices
on federal lands; and
ƒ Offenses involving specially protected fish, wildlife,
and plants
60
Base Level Offenses Factors (cont.)
ƒ Base Level for an Environmental Violation: 8
ƒ Possession of 250 grams of marijuana: 8
ƒ Murder: 43
ƒ Robbery: 20
61
Enhancements to Base Level
ƒ 6 level enhancement of continuous and ongoing
violation, USSG §2Q1.2(b)(1)(A);
ƒ Lack of harm mitigates against finding that a
violation is continuous. United States v. Van Loben
Sels, 198 F.3d 1161 (9th Cir. 1999)
ƒ Number of days a defendant violated the CWA
could be a sentencing factor. United States v.
Chemetco, Inc., 274 F.3d 1154 (7th Cir. 2001)
62
Enhancements to Base Level (cont.)
ƒ Proof of actual contamination IS required. United
States v. Ferrin, 994 F.2d 658 (9th Cir. 1993)
ƒ Harm can be presumed from continuous discharge.
United States v. Hoffman, 2000 U.S. App. Lexis
5185 (4th Cir. 2000)
63
Enhancements to Base Level (cont.)
ƒ Proof of Actual Contamination NOT required
ƒ United States v. Cunningham,
194 F.3d 1186 (11th Cir. 1999)
ƒ United States v. Liebman,
40 F.3d 544 (2d Cir. 1994)
ƒ United States v. Goldfaden,
959 F.2d 1324 (5th Cir. 1992)
64
Enhancements to Base Level (cont.)
ƒ Whether the person has committed prior crimes,
USSG 4A1.1
ƒ A prior unrelated DUI charge outstanding when
offense environmental offense is committed is a prior
crime. United States v. Kyle, 2001 WL 1580232 (6th
Cir. 2001) [unpublished]
ƒ Whether the violation created the threat of death or
bodily injury, USSG §2Q1.2(b)2);
65
Enhancements to Base Level (cont.)
ƒ 4 level increase if the violation involved permit
requirements, USSG §2Q1.2(b)(4);
ƒ Notice to State is not a permit requirement. United
States v. Weintraub, 96 F.Supp.2d 135 (D.Conn
2000); United States v. Chau, 293 F.3d 96 (3rd Cir.
2002)
66
Enhancements to Base Level (cont.)
ƒ Whether the defendant was the supervisor
ƒ 4 levels if more than five person involved.
USSG §3B1.1;
ƒ 2 levels for 2 persons
ƒ United States v. Okoli, 20 F.3d 615 (5th Cir. 1994)
defendant must have been the “organizer, leader,
manager, or supervisor of one or more other
participants.” Need not demonstrate was personally
in charge of five or more participants.
67
Enhancements to Base Level (cont.)
ƒ Vulnerable victim enhancements
USSG §3A1.1(b);
ƒ United States v. Bragg, 207 F.3d 394
(7th Cir. 2000)
68
Enhancements to Base Level (cont.)
ƒ 4 levels for substantial expenditures for clean up;
USSG §2Q1.2(b)(3);
ƒ $200,000 is substantial. United States v. Chau, 293
F.3d 96 (3rd Cir. 2002)
69
Enhancements to Base Level (cont.)
ƒ Whether the violation created the threat of death or
bodily injury, USSG §2Q1.2(b)2);
ƒ Not appropriate unless conviction is for offense that
causes the injury. United States v. Elias, 32 ELR
20,218, 269 F.3d 1003 (9th Cir. 2001)
ƒ Special Skills contributed to violation United States
v. Ellen, 961 F.2d 462
(4th Cir. 1992).
70
Reductions to Enhanced Level
This base level can also be decreased
based on a number of factors, such as,
ƒ Whether the offense involved recordkeeping only,
USSG §2Q1.2(b)(6); or
ƒ Whether the defendant cooperated in the
investigation, USSG §3E1.1
71
Downward Departures
ƒ Is the case outside the ‘heartland of environmental
cases.” USSG §5K2.0.
ƒ United States v. Elias, 32 ELR 20,218, 269 F.3d
1003 (9th Cir. 2001)
72
Other factors
ƒ Standing in community not normally relevant.
ƒ Committing crime to avoid a greater harm not
normally relevant.
73
74 © 2002 K&L Gates
74
Applying the Guidelines
Nature of Offense
Increase/Decrease
Offense Level
Offense involving a toxic waste
8
Increase based on noncontinuous
violation
+4
Increase based on permit
violation
+4
Decrease because defendant pled
guilty/cooperated
-2
Total value assigned to offense
14
75
76 © 2002 K&L Gates
76
Applying the Guidelines (cont.)
Cooperate by pleading guilty -2
77
Applying the Guidelines (cont.)
Downward Adjustment: -2
Criminal History 1
78
79 © 2006 K&L Gates
79
Why Worry About Civil
Environmental Enforcement?
Profits: Economic Benefit of Noncompliance
Compliance Programs
80
EPA Civil Judicial Referrals to DOJ
FY 2002 – FY 2006
Source: Data Source: Integrated Compliance Information System (ICIS), October 28, 2006; data source for previous fiscal years: annual ICIS data
81
Potentially Responsible Party Commitments for
Superfund Site Cleanup, Oversight and Cost Recovery
FY 2002 – FY 2006
$1,000
$900
Total Value ($ million)
$800
$700
$600
Cleanup
Oversight
Cost Recovery
$500
$400
$300
$200
$100
$0
FY02
FY03
FY04
FY05
FY06
Source: Data Source: Integrated Compliance Information System (ICIS), October 28, 2006; data source for previous fiscal years: annual ICIS data
82
Source: http://www.epa.gov/compliance/resources/reports/endofyear/eoy2003/fy2003enforcementandcomplianceendofyearcharts.pdf
83
EPA Dollar Value of Concluded Enforcement Actions
FY 2002 – FY 2006
Criminal Penalties ($ Mil)
Total Civil Penalties ($ Mil)
$154 $149
$100
$150
$100
$124
$71
$62
$50
$96
$100
$80
$47
$43
Administrative
Judicial
$50
$0
$0
FY06
FY05
FY04
FY03
FY02
Injunctive Relief ($ Bil)
FY06 FY05 FY04 FY03 FY02
Supplemental Environmental Projects ($ Mil)
$10
$10
$100
$78
$8
$6
$75
$43
$4.9
$43
$43
$4.
8
$4
$43
$2.8
$43
$3.9
$65
$57
$56
$48
$50
$25
$2
$0
$0
FY06
FY05
FY04
FY03
FY02
FY06
FY05
FY04
FY03
FY02
Source: http://www.epa.gov/compliance/resources/reports/endofyear/eoy2006/2006numbers.html
84
“Clean Water Laws Are
Neglected, at a Cost in
Suffering”
N.Y. Times, September 12, 2009
85
Civil Enforcement Actions
Two types
ƒ Administrative
ƒ Civil Judicial
86
Civil Enforcement Actions
ƒ Differences between civil and administrative:
ƒ Amount
ƒ Injunctive Relief
ƒ Tribunal
87
Civil v. Administrative Enforcement Actions
ƒ Amount- higher amounts go to court
ƒ Injunctive Relief – goes to court
ƒ Tribunal
ƒ ALJ
ƒ Environmental Appeals Board (40 C.F.R. § 22.4)
88
Administrative Enforcement Actions
ƒ Hearing Officers work for EPA
ƒ Regional counsel prosecutes – works for EPA
ƒ Hearing Officers
ƒ Bound by regulations
ƒ Bound by EAB decisions
ƒ Injunctive Relief not Self-enforcing
89
Administrative Enforcement Actions
ƒ Environmental Appeals Board
ƒ Delegated Functions for Administrator in reviewing
administrative enforcement actions- final agency
action
ƒ Three members
ƒ All former EPA enforcement officials
ƒ No statutory basis
ƒ Bound by EAB decisions
90
Civil Judicial Enforcement Actions
ƒ Liability
ƒ Penalty
ƒ Injunctive Relief
91
Liability
ƒ Strict/Vicarious
ƒ Individual →Company
ƒ Subsidiary ≈Injunctive Relief
ƒ (“Bestfoods” analysis)
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Liability Common Issues
ƒ Validity of test results
ƒ Self v. agency
ƒ Applicability of agency “interpretation of regulation”
ƒ Validity of regulation
ƒ Interpretation of permit
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Allegheny Ludlum v. United States
366 F.3d 164 (3rd Cir. 2004)
ƒ “Invalid test” defense
ƒ 30 day violation presumption
ƒ Interest rate
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Liability
Invalid Test defense:
ƒ
Evidence of inaccurate laboratory reporting is
relevant to show that no violation occurred.
ƒ Liability attaches to an unlawful discharge, rather
than the reporting of faulty results.
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Liability - Calculating Days of Violation
“per day of violation”
ƒ Should violation of a monthly average count as a
violation of the regulation on each day?
ƒ The Allegheny Court advised lower courts to exercise
discretion in calculating how many days were out of
compliance, considering:
ƒ Whether the polluter's conduct already had already been
punished by penalties for daily violations by using the
maximum daily penalty as a basis for comparison.
ƒ Whether the site operated on all days during that monthly
period.
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Statutory Criteria Governs Assessment
of Civil Penalties – CWA
ƒ Seriousness of violations;
ƒ Economic Benefit of noncompliance;
ƒ History of violations;
ƒ Good Faith efforts to comply;
ƒ Economic impact on violator;
ƒ Other factors as justice may require
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Clean Water Act: Penalty Policy
ƒ Penalty = Economic Benefit + Gravity +/- Gravity Adjustment
Factors - Litigation Considerations - Ability to Pay Supplemental Environmental Projects
ƒ Gravity= $1000 x (a + b + c + d)
ƒ A—Significance: the degree of exceedance of effluent limits
(scale of 0 to 20)
ƒ B—Environmental and Health: real or potential harm to humans
or environment (scale of 0 to 50)
ƒ C—Number of violations: how many limits in the permit were
violated (scale of 0 to 5, based on percentage)
ƒ D—Significance of non-limit violations
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Clean Air Act
ƒ Size of business;
ƒ Economic Impact on the business;
ƒ History of violations;
ƒ Good Faith efforts to comply;
ƒ Duration of evidence (CRE);
ƒ Payment of penalties previously assessed;
ƒ Economic benefit of noncompliance;
ƒ Seriousness of the violation
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Clean Air Act—Penalty Policy
ƒ EPA will take at least the economic benefit of
noncompliance unless:
ƒ Benefit is trivial and will not affect the violator
ƒ Compelling public concerns
ƒ Concurrent enforcement actions seeking the same
penalty
ƒ The larger the net assets, the bigger the penalty
surcharge
ƒ Beware—large cap companies can see larger
surcharges of up to $70,000
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RCRA
ƒ Seriousness of the violation
ƒ Good faith efforts to comply
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RCRA: Penalty Policy
ƒ Governed by a matrix
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FIFRA
ƒ Size of business;
ƒ Effect on ability to continue in business;
ƒ Gravity of violations;
ƒ Good Faith/due care – warning in lieu of penalty.
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FIFRA: Penalty Policy
ƒ Uses separate matrices for Sections 14(a)(1) and
14(a)(2)
ƒ Based on size of business and level of violation
ƒ Value is assigned for gravity of offense
ƒ Remedy is adjusted based on gravity value
ƒ From 3-8: Reduce matrix value
ƒ From 8-12: Assess matrix value
ƒ 12 and above: Increase matrix value
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TSCA
ƒ The nature, extent, and circumstances of the
violation;
ƒ The gravity of the violation;
ƒ Ability to pay;
ƒ Effect on ability to continue to do business;
ƒ History of noncompliance;
ƒ The degree of culpability;
ƒ Other matters as justice may require
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TSCA: Penalty Policy
ƒ Calculates penalty based on four factors
ƒ Potential or actual harm to human health or
environment
ƒ Potential exposure of the public or environment to an
unregulated new chemical substance
ƒ Impact on the validity of the Inventory
ƒ Deterrent effect of penalty
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Penalty Assessment – Common Issues
ƒ Top down v. bottom up
ƒ Economic Benefit of Noncompliance
ƒ Ability to Pay (parent control)
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Penalty Assessment: Top Down
ƒ Sierra Club v. Cedar Point Oil Co., 73 F.3d 546 (5th Cir. 1996)
ƒ Citizen suit for civil penalties under Clean Water Act
ƒ 809 days of unpermitted discharge
ƒ Court first calculated maximum penalty (809 x $25,000 = $
20,225,000)
ƒ Court then adjusted “downward” based on findings of fact
on statutory factors
ƒ Ultimately, court assessed penalty of $186,070 (based
mostly on economic benefit of noncompliance)
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Penalty Assessment: Bottom Up
ƒ United States v. Smithfield Foods, 191 F.3d 516 (4th Cir.
1999)
ƒ Citizen suit for civil penalties under Clean Water Act
ƒ District court began with the economic benefit of
noncompliance ($4.2 M)
ƒ Added from other six factors to reach a final penalty
of $12.6 M
ƒ Moral—while “top down” seems for defendant-friendly
than “bottom up,” that may not always be the case
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Allegheny Ludlum v. United States
366 F.3d 164 (3rd Cir. 2004)
Interest Rate
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Economic Benefit of Noncompliance
ƒ What should have been done to avoid
noncompliance and when should it have been
done?
ƒ Cost of money
ƒ Level the playing field
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Economic Benefit of Noncompliance
ƒ the expenditures made and included in the
economic benefit calculation must relate
directly to the violations;
ƒ the least costly method of compliance should be
used in calculating economic benefit (Ford v.
Lexus?);
ƒ economic benefit calculations must be based
only on periods of noncompliance
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Economic Benefit of Noncompliance
Methodologies
ƒ Costs avoided method
ƒ Wrongful profits method
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Economic Benefit of Noncompliance
Costs Avoided Method
ƒ Return on funds not spent for compliance
ƒ Avoided operational and maintenance costs and
return on them
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Economic Benefit of Noncompliance
Cost Avoided Methods (con’t)
Measuring Return on Capital Funds
ƒ Cost to obtain capital elsewhere
ƒ Weighted average cost of capital – BEN model
ƒ On what date should company’s capital structure be
used?
ƒ Stability of industry
ƒ Actual rates of return
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Economic Benefit of Noncompliance
Wrongful Profits Method
ƒ Would violator have had to shut down to avoid
noncompliance?
ƒ Potential massive penalties
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Economic Benefit of Noncompliance
Resources
ƒ EPA Enforcement Economic Models:
http://www.epa.gov/compliance/civil/econmodels/index.html
ƒ BEN Model: calculates violator’s economic savings
in delaying or avoiding pollution control measures
ƒ
ƒ EPA Policy and Guidance Documents
http://www.epa.gov/Compliance/resources/policies
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Numquam debes purgamentum
dare rustico cui nomen
Bubbarum et qui carrum utilem
invehit.
118
Never Give Your Waste to a Man
Named Bubba Driving a Pick-Up Truck.
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