EPA-901/9-76-003f
ECONOMIC LAW
ENFORCEMENT
VOLUME H
LEGAL ISSUES
Final Report Submitted Under Contract #M00103910
by: The Connecticut Enforcement Project
Department of Environmental Protection
Hartford, Connecticut 06115
to: The U.S. Environmental Protection Agency
Region I
Boston, Massachusetts 02203
September 1975
S^lSsil l',ii:'-'bCV/a St
-------
INTRODUCTION
The working papers collected in this volume set forth the
legal research the Connecticut Enforcement Project (CEP) has
undertaken in the course of designing economic enforcement
tools for the Department of Environmental Protection. The
analyses were done during various phases of the project and
reflect a number of objectives: (1) to expose constitutional
problems attending Public Act 73-665, the Environmental Enforce-
ment Act, in hopes that the administrative interpretation might
lead the court in a positive direction; (2) to clarify statut-
ory and administrative law constraints to avoid unknown risk-
taking; (3) to examine the legal viability of assessing viol-
ators for the entire period of non-compliance, including the
period prior to detection and during litigation; (4) to detail
the legal consequences attending a number of specific procedural
devices. Although each section focuses on one of these object-
ives, a considerable conceptual overlap necessarily exists.
Similarly, since many of the working papers treat closely re-
lated issues from different perspectives some repetition exists
as well. The substantive material of each section is preceded
by a brief abstract of each of the working papers included.
MAJOR ISSUES
The primary objective of the CEP is to design an adminis-
trative program the effect of which is to discourage delay by
sources in complying with environmental standards by effectively
taxing away the benefits derived from delay. In order to accom-
plish this goal, the CEP staff and DEP personnel have considered
a wide variety of administrative tools. Many of these options
raise different legal problems; taken together they present a
host of legal questions which require answers before Department
administrators can choose among alternative policy and admin-
istrative options. The major legal issues fall into four
categories: constitutional, statutory, assessment period and
procedural.
I. CONSTITUTIONAL ISSUES
The legal questions here relate to the constitutionality
of the statute itself, and the success of the program is con-
tingent upon affirmative answers to each of them. A threshold
question is whether the power to impose assessments administrat-
ively has been properly delegated to the Department. The main
concern here is" that a court may find that the legislature viol-
ated the separation of powers doctrine by conferring on the
Department a power which may properly be exercised only by the
judiciary. Closely related to this is the question of whether
the civil assessments are in fact criminal rather than civil
-------
sanctions. The procedural implications of this question are
manifold, involving, inter alia, the right to a jury trial
and proof beyond a reasonable doubt; moreover, a negative answer
to this question implies a negative answer to the delegation
question. A third question is whether a source who faces a
civil assessment for failing to report information which could
lead to a criminal sanction can be required to report the needed
data despite the privilege against self-incrimination. If the
privilege were applicable in this context to a large number of
sources, the effectiveness of the program would be vitiated.
Delegation of
Judicial Authority
Whether administrative agencies can impose civil assess-
ments or penalties without infringing on judicial authority is
a question all but settled in federal jurisdictions and in some
states, notably Illinois. The authority to assess penalties
has been termed "quasi-judicial," and therefore permissible,
as long as the delegation is accompanied by standards to guide
the agency in its use of discretion, a full hearing opportunity
for the alleged violator and the availability of judical re-
view. The Enforcement Act exhibits each of these features,
but since Connecticut law remains unsettled on the question of
delegation, its persuasiveness cannot be taken for granted.
The Civil/Criminal
Distinction
Logically and economically, civil assessments and criminal
fines have similarities often so close that distinguishing them
is difficult. This is an area where judicial standards remain
highly ambiguous, the cases display little clarity in reason-
ing regardless of holding. Because of this confusion and the
result-orientation of many decisions, specific guidance is
difficult to glean. Three factors in particular, however
suggest that the assessments will ultimately be upheld as civil:
their purpose is remedial rather than punitive; they are in part
compensatory in nature; and the legislature manifestly intended
them to be non-criminal. But the key to sustaining the Enforce-
ment Act with respect to this question (and the delegation ques-
tion) may well be the Department's ability to persuade the
Connecticut Supreme Court that civil assessments are merely one
tool among a number of administrative devices designed to con-
trol pollution and to preserve the environment, and that the
Department (rather than a court) has the expertise that enables
it to fashion and apply this remedy.
Self-incrimination
Under the Enforcement Act, a source would be subject to
assessment for failure to provide information required by re-
porting regulations. At the same time, such information could
11
-------
in some cases, disclose information about substantive viola-
tions for which the source would be criminally liable under
other environmental laws. The question is whether the potential
for such liability would permit a source to avoid complying
with a departmental reporting requirement on the grounds of
the Fifth and Fourteenth Amendments' privilege against self-
incrimination.
With respect to corporations the problem does not appear to
be a serious one, since the privilege is only available to in-
dividuals, and not to Businesses. Moreover, even with respect
tn individuals, the use of reporting requirements to compel dis-
closure of information which could subject the reporting party
to criminal liability exists in other areas, especially in the
tax field.
II. STATUTORY ISSUES
These questions concern the Department's authority to adopt
various regulatory strategies not specifically mentioned in the
statute. The principles of Connecticut statutory interpretation
are first considered in a general way, since they are likely to
be involved in any challenge to the regulatory provisions. Next,
the use of the cost of compliance as the basis for the calcula-
tion of assessments - the essence of the regulatory approach -
is examined in relation to the authority conferred by section 2
of the Enforcement Act. Three other unspecified devices, the
use of cost of capital in the calculations, the deferral of
assessment calculations and the use of a formula rather than an
"amount" in the violation notice are examined in the same context.
Finally, the pattern of judicial review is explored in other
areas where formulae are applied to determine remedies.
Statutory Interpretation
In Connecticut
Connecticut courts generally adhere to the "plain language"
or "strict construction" doctrine in examining regulations for
conformity with statutes. This rule will be relaxed if a literal
interpretation produces a "bizarre result" or if the meaning of
the statute is not plain, but ambiguous. In the latter event
the courts will look to the legislative history of the act and
afford some deference to the administrative interpretation,
especially if it is longstanding. In addition, a remedial stat-
ute will be construed as broadly as possible within the limits
of "plain language", while a penal statute will be construed
narrowly. Thus the validity of many of the regulatory provi-
sions may depend upon the court's overall characterization of
the statute.
111
-------
Cost of Compliance
The use of cost of compliance as the basis for administrat-
ive assessments, subject to reduction upon consideration of
other factors, appears likely to be upheld. The economic
formula used to generate the schedules of maximum assessments
and assessments in individual cases, employs costs of compliance
as the basic data of calculation. This approach is clearly
authorized by the "immediate and continued compliance" stand-
ard of §2(b) of the Act. But since §§2(b) and 2(c) prescribe
additional factors to be considered, the question could arise
whether the cost of compliance approach, together with the
potential for later adjustment, is consistent with the statute.
Consistency should not be a problem as long as each of the other
factors is given explicit consideration.
Costof Capital
The use of cost of capital in the calculations could be
challenged on the grounds of unreasonableness and the absence
of an evidentiary opportunity to prove a source-specific,
rather than an industry-wide, rate. But precedent in Connect-
icut and other jurisdictions in the public utilities area in-
dicates both that cost of capital is a generally acceptable
approach and that a heavy burden of proving it unreasonable
in a specific case rests on the regulatee. The method and
data used to determine the cost of capital in any case appear
well within judicial standards of deference to administrative
expertise.
Deferral Of
Assessment Calculations
The Department cannot calculate an assessment precisely
in any case until it obtains specific cost information concern-
ing the source subject to assessment. In response to this
problem, the Department considered three options for deferral.
The first involves the postponement of statutory notice and
the issuance of a warning letter in its place. This device
raises a question of statutory authorization, and this prob-
lem is explored in detail in the procedural section of the
volume. The second option contemplates immediate statutory
notice with crude, high estimates subject to later mitigation.
This option includes the marginal possibility that the initial
estimates will be found so crude as to be arbitrary and un-
reasonable. The third option involves notice of the formula
rather than of a stated amount, and is considered more fully
in a separate working paper.
Use Of Formula
Rather Than Amount
Under a strict application of the "plain language" doctrine,
iv
-------
this device would probably not be acceptable. It could be
argued, however, that the administrative difficulties entailed
in establishing an amount before the receipt of necessary data
constitute a "bizarre result", and that a more liberal inter-
pretation is therefore warranted.
Judicial Review In
Similar Areas
Consideration of judicial review in other areas where
formulae are employed in a remedial context suggests that an
agency is given wide discretion in its selection of reasonable
remedial tools provided that it explicitly considers every
factor mentioned in the statute and affords the regulatee the
opportunity of demonstrating special circumstances warranting
departure from the formulae.
III. ASSESSMENT PERIOD ISSUES
Unless the period for which assessments can be made is
commensurate with the period of non-compliance, the effective-
ness and equity of the enforcement program will be seriously
compromised. Not to include past non-compliance would encour-
age a source to persist in his dilatory conduct until the
violation is brought to the Department's attention. Similarly,
to toll the accumulation of the assessment during administrative
proceedings and judicial review would invite frivolous litiga-
tion from the regulatee while he continues to reap the benefits
of delay. Such exclusions from liability would drastically
curtail the effectiveness of enforcement, deprive the com-
petitors of a violator equal enforcement, and cost the state
for unwarranted litigation. Only liability for the entire
duration of non-compliance can make the incentive for com-
pliance a reality. This liability involves questions of con-
stitutionality, statutory authorization and evidentiary suf-
ficiency.
Past Delay
. The legality of including pre-detection noncompliance in
the assessment period depends upon the sufficiency of notice
and proof. Superficially, an assessment for past delay appears
to have an ex post facto character about it. Neither ignorance
of the law nor delays in detection excuse liability, however.
Sources are subject to no new requirements under the enforcement
program. Instead, the Department is simply employing a new tool
to enforce existing laws.
Articulating liability for pre-detection noncompliance en-
tails a choice between creating a presumption of continuing
violation or stating an economically based remedial policy.
The Department is less interested in establishing a violation
of emissions standards by any source on any given day than in
ensuring that proper control equipment is installed to reduce
the risk of excess emissions during normal plant operations.
v
-------
Thus, whether a source violates on a given day or not is less
important than whether an investment in a control technique was
necessary, and if so whether that investment was made on time.
Articulating this policy toward the timing of investment avoids
the need for the Department to prove an emissions violation pn
each day for which assessment is made. The Department need
only prove the single violation, the need for a control tech-
nique investment and the source's failure to make that invest-
ment in the past. Such a policy decision is less prone to
judicial scrutiny than is an evidentiary presumption of contin-
uous past violation.
Assessment Accrual
During Litigation
The argument may be made .that assessments which accrue
during litigation discourage a source from pursuing his admin-
istrative and judicial remedies. In fact, however, an assess-
ment accruing during this period does no more than neutralize
what would otherwise be a net gain, and thus an incentive to
litigate. Case law is replete with instances in which courts
have upheld devices designed to deter frivolous litigation
(bonding requirements, filing fees, etc.) and to tax away the
use of money during the appellate period (interest accrual
during tax appeals, interest accrual during damage actions,
etc.). Moreover, a source which questions the applicability
of environmental standards can initiate a proceeding for a
declaratory ruling without risk of liability. Courts have
held that failure to test liability by declaratory ruling
brings risk of liability through enforcement. Finally, the
Connecticut courts retain discretion to toll accumulation should
they find it to be an unreasonable financial imposition on the
source.
IV. PROCEDURAL AND
MISCELLANEOUS ISSUES
'i'he materials in this section explore the legality of two
general procedural devices - issuing a warning letter before
a notice of violation, and deferring part of a hearing if
adequate cost data is unavailable at the time. This section
also includes analyses of several smaller questions related
to specific programs.
The warning letter provision is embodied in subsection
602(f)(1) and was included in response to industry requests
that some informal notice, followed by an opportunity to cor-
rect, be given a source before a formal assessment notice is
sent. The Enforcement Act makes no reference to warning letters,
however, and the question arises whether such a device is be-
yond the Department's statutory authority.
The purpose of the hearing deferral/partial final order
provision in §602(f)( 2) and in parallel sections of the
VI
-------
regulations for water pollution, coastal filling, and operation
and maintenance is to grant the Department staff sufficient time
to collect cost data necessary for the determination of the pre-
cise amount of the assessment. The questions here are whether
such a provision is within the Department's authority, whether
it conflicts with the Administrative Procedures Act or whether
it violates due process.
>t
Four procedural questions concerning individual enforcement
units are also examined:
(1) Are polluters who began discharging waste water
prior to May 1, 1967 liable under Connecticut's
Clean Water Act or the Federal Water Pollution
Control Act to an assessment for operating
without a permit?
(2) What is the scope of judicial review for Oper-
ation and Maintenance requirements embodied in
regulations, permits or orders, or used to prove
emissions violations?
(3) Can Operation and Maintenance requirements be
imposed upon a large number of sources by way
of a class-wide order?
(4) What evidentiary effects follow from a source's
failure to monitor his operations or his tamp-
ing with monitoring devices?
Warning Letter
Although no specific mention of a warning letter is made
in the statute, the device is within the express authority of
the Commissioner to adopt procedural regulations necessary to
carry out his responsibilities. It is necessary to avoid frus-
trating the administration of §2 (c) of the Enforcement Act, and
it is consistent with case law in Connecticut setting forth
limits of discretion in adopting regulations to implement
statutory mandates.
Hearing Deferral and
Partial Final Order
The scheme set forth in 602(f) and in parallel sections
in companion regulations is not expressly authorized in the
Enforcement Act, but neither does it directly conflict with
any of the provisions of the statute. Moreover, it functions
within a total regulatory scheme that is clearly within the
authority of the Department. The provision itself is unlikely
to offend due process, but an egregious delay in any particular
case may well be subject to judicial disapproval.
VII
-------
Liability of
Pre-1967 Polluters
If the Department has the discretion to impose an assess-
ment for preexisting liability of some kind, the incidence of
dilatory litigation is likely to decline. Polluters who
commenced discharging after May 1, 1967 are liable to large
assessments for operating without a permit. Those who com-
menced discharging before May 1, 1967 may be similarly liable,
but only after they have failed to renew a permit issued after
compliance with an abatement order. An amendment to the State
Clean Water Act is suggested to resolve this issue.
Issues Relating To The
Operation and Maintenance Program
The scope of judicial review is likely to be relatively
narrow if Operation and Maintenance requirements are embodied
in regulations. Should they be included in an order to an
individual source, the scope is somewhat broader. The primary
potential for reversal would be on grounds of "unlawful pro-
cedure," in particular,if the Department refused to consider
unverifiable evidence from the source which the reviewing
court might deem pertinent.
Imposition of Operation and Maintenance requirements by
means of an order to a well-defined class of sources would be
the most efficient procedure available to the Department.
Such a device appears to be legally valid provided that the
class can be defined with sufficient precision, but the pos-
sibility that the courts might view the order as a disguised
regulation cannot be dismissed.
If Operation and Maintenance standards are nowhere pre-
scribed, they may nonetheless serve as a standard of proof
for an emissions violation. The failure of a source to meet
such standards will support an inference of emissions violation
necessary to sustain an assessment. However, proof of a single
operation and maintenance deficiency will probably be insuffic-
ient to satisfy the Department's burden of proof for establish-
ing a continuous O&M violation over the period since control
equipment was installed.
If a source either fails to keep or tampers with required
monitoring information,. a hearing officer could either create
an adverse inference (or presumption) arising from such failure
or restrict the scope of admissible evidence as a countermeasure.
The former alternative will probably succeed in a case where the
source has destroyed the information. But it will probably
fail if the source has never kept the evidence, unless the courts
can be persuaded to alter precedent by permitting the inference
to stand in lieu of a prima facie case. Any mandatory restric-
tion of evidence is apt to be held a procedural error by the
courts, but a voluntary agreement to this effect by the source
remains a distinct possibility.
viii
-------
CONTENTS
Introduction i
Part I. Constitutional Issues 1
A. Delegation of Judicial Authority 2
B. The Civil/Criminal Distinction (I) 20
C. The Civil/Criminal Distinction (II) 37
D. Self-Incrimination (I) 44
E. Self-Incrimination (II) 51
Part II. Statutory Issues 73
A. Statutory Authority and Rules of Construction 74
B. Cost of Compliance As The Basis For Civil
Assessments 80
C. Cost of Capital 88
D. Judicial Review of Formulae 93
E. Deferring the Calculation of Civil Assessments 101
F. The Interpretion of "Amount" as "Rate" 117
Part III. The Assessment Period Issue 122
A. Assessments for Past Delay 123
B. Assessments During Litigative Delay (I) 144
C. Assessments During Litigative Delay (II) 154
D. Due Process and the Assessment Period 175
Part IV. Procedural and Miscellaneous Issues 183
A. The Warning Letter 184
B. Deferred Hearing and Partial Final Order 204
C. Water Compliance: Permit Liability 212
IX
-------
D. O&M Requirements: Scope of Review 222
E. O&M Requirements: Imposition of Class-Wide 238
Orders
F. O&M Requirements: Sanctions Available to Hearing
Officers 250
APPENDIX
A. The Enforcement Act 272
B. Waukegan v. Pollution Control Board 291
C. H. Goldschmidt, "An Evaluation of the Present and
Potential Use of Civil Penalties as a Sanction by
Federal Administrative Agencies." 300
x
-------
I CONSTITUTIONAL ISSUES
-------
DELEGATION OF JUDICIAL AUTHORITY
Although the issue has been raised on numerous occasions,
the U. S. Supreme Court has never held that judicial authority
had been improperly conferred upon an agency. The Court has
also consistently upheld the administrative imposition of
civil assessments.
State courts have generally followed the federal lead, pro-
vided that the delegation was accompanied by adequate standards
to insure against abuse of power. The Illinois court, in part-
icular, upheld a statute similar to Connecticut's Enforcement
Act because it provided for adequate opportunity for hearings
and judicial review, and because it established a set of guide-
lines within which the agency was required to act.
The issue has not been decided conclusively in Connecticut.
One early case let stand the conferral of quasi-judicial auth-
ority upon a local board of health because the power was deemed
necessary for the preservation of public health. The authority
in question, however, was the ordering of the destruction of
artificial oyster beds, and the threat to public health was a
scarlet fever and diphtheria epidemic. In a recent case, the
Connecticut Supreme Court, in dicta, expressed disapproval of
an antitrust "civil penalty" to be imposed by the Attorney
General. The reasoning, however, was that the civil penalty
was not remedial in character.
Collection procedures in Connecticut have been uniformly
upheld as necessary incidents to other powers.
-------
To: CPEP Legal Staff Date: November 4, 1974
From: David Rivers
Memorandum re: Summary of Law Concerning Legislative
Delegation of Judicial Authority
Introduction
The following memorandum is intended as a brief survey
of case law as applied to the issue of whether the civil
penalties provision of Section 2, Public Act 73-665 is an
unlawful delegation of judicial authority to a state
administrative agency.1 Simply stated, the question is
whether the authority of the Commissioner to determine whether
a violation of a regulation exists, to impose a civil penalty
for such violation, and to execute unappealed final decisions
as judgments of the Superior Court offends principles of
separation of judicial and executive power.
Use of civil monetary penalties is a relatively recent
development in administrative law, but the delegation issue has
been raised in many similar situations, and the resulting
decisions are applicable. It must be kept in mind, however,
that the question of judicial authority is peculiar to each
jurisdiction, based on the wording of its constitution and its
own particular theory of separation of powers. Thus, federal
cases upholding delegation may be partly based on the plenary
power of Congress over matters concerning aliens or commerce.
-'-Use of the term "delegation" is, of course, a
misnomer since a legislature cannot delegate a power it does
not have. Properly phrased the issue concerns the attempt of
a legislature to confer judicial authority on an agency,
State Ex. Rel. Lanier v. Vines, 274 N.C. 486, 164 S.E. 2d. 161
at 166. However, since delegation is used almost uniformly
throughout the cases, it will be used here as well.
-------
See, e.g., Oceanic Navigation Co. v. Stranahan, 214 U.S. 320
(1908); Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 38!
(19^0). Likewise, a state case may depend on provisions peculiar
to that state's constitution, as in State Ex. Rel. Lanler v.
Vines, cited in footnote 1, where North Carolina's constitution
specifically provided for vesting administrative agencies with
judicial powers. For the most part, though, the decisions tend
to follow similar lines of reasoning and there is frequent
borrowing from the case law of other jurisdictions.
Delegation of Judicial Authority
Perhaps the best statement of the problem and its
development was given by Hammond, C.J., in State Insurance
Commissioner v. National Bureau of Casualty Underwriters, 248
Md. 292, 298-299, 236 A. 2d. 282, 285-286:
In the earlier days of the exercise of governmental
powers by administrative bodies, there was widespread
fear that the delegating of administrative, legislative
and judicial powers or functions to a single agency not
only violated the theory of separation of powers but
spelled its death knell. Emotional resentment against
the rise of administrative power by lawyers and judges
rose and resulted in efforts to thwart or destroy this
veritable fourth branch of government by invoking the
separation of powers theory or using the non-delegation
doctrine or requiring a full and complete de noyo
judicial determination. These efforts had no more success
than had the plaintiff in the case of King Canute versus
The Sea. Legislatures, national and state, steadily
continued to increase administrative agencies and
administrative power (cite omitted), and as these agencies
have proliferated they have come to legislate more than
legislatures and to adjudicate more than courts ....
-------
The early fears of the bar and bench have largely
disappeared with experience. It became apparent that
the complex problems of modern social, economic and
industrial life for ever-increasing numbers of people
could be solved or settled more expeditiously, cheaply
and simply by administrative processes than by
traditional executive, legislative and judicial processes,
because the blending of powers in one agency, which
operates in its particular field or specialty continuously
over the years and produces an expertise and a superior
ability both correctly to evaluate specialized questions
and to supply correct answers to these questions—often
due largely to the staff of permanent, expert employees
who serve under the successive heads of the agencies;
and secondly, it was recognized that the dangers inherent
in government by administrative bodies lie not in the
blending of powers in a single body but in permitting
that body's power to be beyond check or review.
The checks on administrative power have been
supplied.
It is significant, as Davis says, that, though the issue
has often been presented, the United States Supreme Court has
never held that judicial power has been improperly vested in
an administrative agency, Davis, Administrative Law, §2.12. As
early as 1888, the Court was faced with the question of whether
it was proper for the Postmaster General to determine amounts
of forfeitures on mail carriers who failed to carry mail within
time limits contractually prescribed. The power was held to be
properly conferred by statute, within the Postmaster General's
discretion, and therefore not subject to review by the Court.
Other early cases affirmed the quasi-judicial function of
administrative agencies. In Oceanic Navigation C. v. Stranahan,
214 U.S. 320 (1908), the court upheld a section of the Alien
Immigration Act which allowed imposition of a penalty on
transportation companies for bringing in aliens with loathsome
-------
or contagious diseases. The argument was made that even though
matters concerning aliens might be wholly within the powers of
Congress, the Act was nonetheless unconstitutional as defining
a crime and then authorizing an administrative official to
determine whether the crime had been committed and to inflict
punishment. The Court responded by stating that the Act clearly
distinguished those situations where particular violations were
intended to be criminal" . . . and those where it was contemplated
that violations should not constitute crimes, but merely entail
the infliction of a penalty, enforceable in some cases by
purely administrative action ..." 214 U.S. at 337- Looking
to the purpose of the Act, the Court said that it tended, through
the avoidance of controversy and delay, to secure the efficient
performance by transportation companies of medical examinations
before embarkation, thus carrying out the policy of Congress.
Finally, as to the argument that imposition of penalties must be
governed by rules controlling criminal prosecution, the Court
stated that this was "... clearly without merit, and is not
open to discussion." 214 U.S. at 338. The Court followed through
on its holding in Stranahan a year later by holding in
Monongahela Bridge Co. v. U.S., 216 U.S. 177 (1909) that to deny
Congress the authority to delegate power to determine some fact
or state of things upon which enforcement of its enactment may
depend, would often render it impossible or impractical to carry
on the public business.
-------
The determination of later cases followed these earlier
decisions. In Zakonaite v. Wolf, 226 U.S. 272, involving
deportation of an alien for practicing prostitution (where the
appellant was actually arrested and held in custody) the
objection that the statute vested judicial powers in the
executive branch was held to be "without substance and requires
no discussion." And in Arver v. U.S., 245 U.S. 366, the
selective draft statute for raising an army during WWI was held
not to be void as conferring judicial power on an administrative
officer. Shields v. Utah Idaho Cent. R. Co.. 305 U.S. 177, held
that conferring authority on the ICC to determine whether
railways were subject to the provisions of the Railway Labor Act
was not an unconstitutional delegation of power. In Sunshine
Anthracite Coal Co. v. Adkins, 310 U.S. 381, 60 S. Ct. 907, the
Court held that it was not unconstitutional for Congress to
delegate to an administrative agency authority to determine the
question of fact whether a particular coal producer fell within
the Bituminous Coal Act. The Court stated that "to hold that
there was an invalid delegation of judicial power would be to
turn back the clock on at least a half century of administrative
law." 60 S. Ct. at 915- Finally, it has been held that findings
of fact by administrative bodies may be made conclusive,
Reconstruction Finance Corp. v. Bankers Trust Co., 318 U.S. 163,
and it is now considered well settled that a court has no right to
review and redetermine questions of fact considered and lawfully
determined by an administrative authority, N.A.
-------
Woodworth Co. v. Kavanagh, 102 F. Supp. 9.
Administrative Authority to Assess Civil Penalties
Consistent with its affirmance of quasi-judicial authority
for administrative agencies, the Supreme Court has also upheld
administrative assessment of civil penalties.
A monetary penalty for bringing in aliens with physical
or mental diseases or defects under the Immigration Act of
1917 was upheld in Lloyd Sabando Sosieta v. Elting, 28? U.S.
329. The court found that due process did not require that
courts, rather than agencies, determine the facts on which
a penalty depends. It was further found that Congress could
choose the administrative rather than judicial method of
imposing penalties since they were neither unreasonable nor
confiscatory in amount. The Court did state, however, that
the administrative action would be subject to judicial review
to determine whether it was within the statutory authority,
whether the evidence supported the determination, and whether
the procedure adopted satisfied elementary standards of fairness
and reasonableness essential to the due administration of the
summary proceeding which Congress had authorized.
Recent federal cases have more or less taken for granted
the validity of this administrative authority. In Nadiak v.
C.A.B., 305 F. 2d. 588 (5 Cir. 1962), the Court stated that
in highly technical areas the need to evaluate the offending act
and fashion a suitable remedy requires that an agency be vested
with a wide range of discretion in imposing penalties. Judicial
-------
review would be confined, the court went on, to the inquiry
whether an abuse of discretion had occurred. Where a 600
dollar penalty was imposed under the OSHA of 1970, the court
dismissed with one line the contention that the penalty was an
unconstitutional abridgment of the petitioner's right to criminal
enforcement only through the courts--"Civil penalties are
not uncommon in federal law, and Congress here clearly intended
to create a civil sanction." American Smelting and Refining
Co. v. Occupational Safety and Health Review Commission, No. 73-
1721, U.S. Ct. of Appeals, 8th dr., filed July 15, 1974.
Decisions on the state level generally follow the analysis
used in the federal cases. The Illinois Supreme Court held
that the Tax Department's power to assess penalties under the
Retailers Occupation Tax Act was ministerial, not judicial,
merely requiring calculation or computation from data on which
all minds must ordinarily reach the same result. A Utah statute,
54-7-25 (1), U.C.A., 1953, authorizing a penalty of $500 to
$2000 for each violation or failure to comply with any order of
the Public Service Commission, was challenged as criminal and
therefore beyond the power of the P.S.C. to determine whether
violations had been committed. In upholding the statute, the
state Supreme Court said there was no question that the
Commission was required to and did perform some functions of a
judicial or quasi-judicial nature and that the legislature
could validly confer (the power to enforce the law and
regulations by administrative procedure. The court added,
-------
10
however, that since this was a penalty closely akin to criminal
penalties, evidence of violations, although not having to be
beyond a reasonable doubt, should at least be clear and
convincing, Wycoff Co. v. Public Service Commission, 13 Utah
2d. 123, 369 P. 2d. 283 (1962).
Standards for Sustainable Delegation
State courts have been concerned with preventing abuse
of powers granted to administrative agencies. Thus, the
Florida Supreme Court has required that where the legislature
delegates to a quasi-judicial agency the power to adjudicate
private rights, it is essential that the act so delegating
define with reasonable certainty the standards which will
guide the agency in the exercise of the power, Delta Truck
Brokers, Inc. v. King (Fla.), 142 So. 2d. 273- Similarly,
the Maryland Court of Appeals, in County Council for Montgomery
County v. Investors Funding Corp., 270 Md. 403, 312 A. 2d. 225
(1973), while specifically holding that "... the authority
to impose a civil monetary penalty is not a power beyond
constitutional delegation to an administrative agency . . .,"
found the particular penalty involved (for violation of
landlord/tenant ordinance) illegal because of "... the total
absence of any legislative safeguards or standards to guide
(the agency) in exercising its discretion . . .", 312 A. 2d. at
246. Availability of judicial review is also held to be
essential, one court stating "... at this advanced date in
the development of administrative law, we see no constitutional
objection to legislative authorization to an administrative
-------
11
agency to award, as incidental to relief in connection with a
subject delegable to it, money damages, ultimate judicial
review thereof being available." Jackson v. Concord Co., 54 N.J.
113, 253 A. 2d. 793 at 800 (1969). Where the legislature has
not expressly provided for judicial review, a court may
utilize its inherent powers to prevent illegal, unreasonable,
arbitrary or capricious administrative action, State Insurance
Commissioner v. National Bureau of Casualty Underwriters, 248
Md. 292, 236 A. 2d. 282. The Washington Supreme Court, in
upholding the administrative award of damages in a case
involving discrimination in a housing transaction, set forth
a test to be used in reviewing legislation granting an agency
the power to impose penalties or assess damages. The legislation
should:
(1) define the conduct sought to be punished or the
injury to be compensated
(2) set out the normally acceptable limits of
punishment or compensation, and
(3) allow the adjudicative body to determine the
appropriate punishment or compensation by
applying general principles of morality and
traditional concepts of justice.
Rody v. Hollis, 81, Wash. 2d. 88,
500 P. 2d. 97 at 100 (1972).
At least one state has had occasion to review thoroughly
a statute similar to Connecticut's civil penalty legislation.
Illinois' Environmental Control Act (111. Rev. Stat. 1971, Ch.
Ill 1/2, Par. 1041), Sections 33(c) and 42, authorize a penalty
of up to $10,000 for violations of the Act or regulations adopted
under it, and an additional penalty of $1,000 per day for each
day the violation continues. The petitioner in Ford v. EPA, 9
111. App. 3d. 711, 292 N.E. 2d. 540 (1973), claimed that the
-------
12
imposition of a monetary penalty was a judicial function which
could not be delegated to an administrative officer or agency.
The Appellate Court for the First District upheld the statutes
saying that, while it was clear that an administrative agency
could not impose criminal penalties, an administrative officer
or agency could penalize, without offending the constitution,
when the penal function was incidental to the duty of administering
the law. The court stated that the legislature intended a civil
sanction, there being no mention of crime or criminal prosecution
and there being a distinctly civil procedure for collection of
penalties imposed. "Although the essentially legislative and
judicial powers cannot be delegated, we believe it implicit in
the authorities that where direct or immediate judicial action
is inexpedient or impractical, quasi-judicial functions may be
conferred upon and exercised by an administrative agency, provided
the laws conferring such powers are complete in their content,
are designed to serve a general public purpose, are such as to
require consistent and immediate administration, and further
provided that all administrative actions are subject to judicial
review." 292 N.E. 2d.at 5^3-544.
Subsequent to Ford, Section 42 of the Environmental Control
Act was challenged in three other cases. The Third District upheld
the statute, Incinerator, Inc. v. 111. Pollution Control Board,
15 111. App. 3d. 514. It was held invalid in the Second and Fifth
Districts, Waukegan v. Pollution Control Board, 11 111. App,
3d. 189, and Southern Baptist Asphalt Co. v. EPA, 15 111. App.
3d. 66. Faced with this split in the districts, the State
-------
13
Supreme Court agreed to hear Waukegan on appeal, 6 E.R.C. 1395
(No. ^15984, March 29, 1971*). As stated In the decision, only
one question was before the court . -"Was the authority given
the Board to impose monetary penalties under the Environmental
Protection Act (cite omitted) a delegation of judicial power
in violation of the separation-of-powers provision of the
Constitution of Illinois or of the Constitution of the United
States?" 6 E.R.C. at 1396. After reviewing U.S. Supreme Court
and state cases, the Illinois court concluded "It is clear that
the trend in state decisions is to allow administrative agencies
to impose discretionary civil penalties." 6 E.R.C. at 1398. It
was held that the authority given to the Pollution Control Board
to Impose monetary penalties did not violate the constitutional
separation of powers. The court recognized three Important
provisions of the Act:
(1) that there was a detailed hearing provision,
(2) there was adequate judicial review, and
(3) the statute established guidelines that the
Board must follow in imposing penalties, concluding
that, "The legislature may confer those powers upon
an administrative agency that are reasonably necessary
to accomplish the legislative purpose of the agency."
6 E.R.C. at UtOO.
Connecticut Cases
A search of Connecticut case law indicates that the
question of conferring judicial functions on state agencies has
-------
14
not been conclusively decided.2 The existing case law concerns
delegation of legislative powers to administrative agencies
(see, e.g., State v. Stoddard, 126 Conn. 623, Keating v.
Patterson. 132 Conn. 210, Aunt Hack Ridge Estates, Inc. v.
Planning Commission, 160 Conn. 109, and cases cited therein)
and the converse of the present problem, i.e., the attempt to
confer administrative powers on the judiciary (see e.g., State
Water Commission v. City of Norwich, 141 Conn. 422, Chernesky
v. Civil Service Commission of the City of Bridgeport, 141 Conn.
465, Jaffe v. State Department of Health, 135 Conn. 339). Despite
the absence of decisive precedent, the Court has indicated its
sensitivity to the judicial delegation issue: "... there
has remained no doubt that our Constitution is to be construed
as a grant and not a limitation of power, and that the exercise
of judicial power is forbidden to the legislative branch of the
government, as the legislative is to the judicial," Bridgeport
Public Library and Reading Room v. Burrough's Home, 85 Conn. 309
(1912). See Szarwak v. Warden, Vol. XXXVI, No. 4 Conn. Law J.
1 (Supreme Court, 1974).
The State Supreme Court considered the problem of delegation
of judicial authority in an early case, Raymond v. Fish, 51 Conn.
80 (1883), concerning a local board of health which had destroyed
2The constitutional provisions involved are Article 2
and Article 5, Section 1, Conn. Constitution of 1965-
Article 2 provides: "The powers of government shall be
divided into three distinct departments, and each of them confided
to a separate magistry, to wit, those which are legislative to one;
those which are executive to another; and those which are judicial
to another."
Article 5, Section 1 provides: "The judicial power of
the state shall be vested in a supreme court, a superior court,
and such lower courts as the general assembly shall, from time
-------
15
artificial oyster beds in the belief that they were contributing
to an epidemic of scarlet fever and diphtheria. The board
operated under a statute granting it "all the power necessary
and proper" for preserving public health and preventing the
spread of disease, and imposing the duty to remove all filth
which in their judgment endangered health. The plaintiff argued
that the statute conferred judicial powers upon a tribunal not
warranted by the constitution. The court upheld the statute as a
valid police regulation for the public health. It cited with
approval a Massachusetts case, City of Salem v. Eastern Ry. Co.,
98 Mass. 431, which stated, "There are many cases in which powers
of determination and action, of a quasi-judicial character, are
given to officers entrusted with duties of local or municipal
administration, by which not only the property but the lives of
individuals may be affected." 51 Conn, at 101. To date, Raymond
still stands as the law in Connecticut.
One lower Connecticut court did recently consider the
civil penalty problem. In dicta, without deciding the issue,
the court in Mobil Oil Co. v. Killian, 30 Conn. Sup. 87, 301 A.
2d. 562 (1973), questioned the validity of the civil penalties
provision of the state's Anti-Trust Act, Section 35-38, C.G.S.,
noting that the legislature could not confer power of criminal
^Continued, to time, ordain and establish. The
powers and jurisdiction of these courts shall be defined by law."
-------
16
prosecution on the attorney general (an executive official)
because of the separation of powers doctrine of Article 2 of the
State Constitution. The court, however, based its reasoning on
the fact that the penalty section (unlike the treble damages
and injunctive relief sections of the Act) was not designed
to be remedial in character. It is important to note that the
penalty in Mobil Oil was not part of any regulatory scheme, but
was simply imposed any time a violation of the Anti-Trust Act
was found to exist.
Turning to Section 2, P.A. 73-665, itself, the civil
penalties provisions fit within the requirements of proper
delegation of authority as delineated by the case law. The
legislature has effectively circumscribed any discretion
conferred upon the Commissioner. In Subsections 2(a)(l) through
(4) the amounts of penalties that may be adopted in a penalty
schedule are given specific limits for each individual type
of violation. Subsection 2(b) sets forth legislative guidelines
to be used in adopting a fee schedule and Subsection 2(c)
provides detailed guidelines for imposing a penalty in any
individual case. Due process requirements are imposed in
Subsection 2(d), (e) and (f). Detailed notice must be given to
any person believed to be in violation. There is opportunity
for hearing, and all hearings must be conducted pursuant to
the Administrative Procedures Act (Sections 4-177 to 4-184,
C.G.S.). Any decision imposing a civil penalty is subject to
judicial review.
-------
17
It is also clear on the face of the Act that the
legislature intended it to be remedial in nature. Section 1
of P.A. 73-665 allows the commissioner to maintain a civil
action for damages where regulations are violated or harm
is done to the environment. But where such a suit is instituted,
the commissioner is precluded from imposing a civil penalty.
Thus, the civil penalty provision is meant as an alternative
to the damages provision, not as a punitive provision. Moreover,
the civil penalties provisions have been completely separated from
criminal sanctions (e.g., Section 19-508a, C.G.S.). Unlike the
penalty involved in Mobil Oil Co., supra, the penalty provisions
of Section 2, P.A. 73-665a are a part of an integrated regulatory
scheme, necessary in performing the administrative function and
carrying out the legislative policy of protecting the public
health and environment.
Execution of Final Decisions
A final and related problem is the method used in
collecting the civil penalties. Subsection 2(h) of P.A. 73-665
allows an order assessing a civil penalty to be filed with the
clerk of the superior court, and then to be docketed, given the
same effect as, and enforced as a judgment of the court. The
question may arise as to whether this method of enforcing
penalties is an invalid delegation of judicial authority.
In Mallat v. Lulhn, 206 Ore. 678, 294 P. 2d. 871 (1956),
the court considered Oregon's Relative Support Act requiring
reimbursement from relatives of recipients of old age assistance.
-------
18
The Public Welfare Commissioner was allowed to issue a warrant
under his own hand that would be entered on the judgment docket
and collected as a judgment lien. It was held that this was
not an unlawful delegation of judicial power. The court found
that the mere fact that some functions usually performed by
courts are conferred upon an administrative body does not
necessarily bring the legislation into conflict with the
principle of separation of powers. It was concluded that the
state had the right to collect its pecuniary obligations by
summary proceedings when, as in the case at hand, judicial
review of the administrative decision was available. The issue
was again raised in Mazama Timber Products, Inc. v. Lane Air
Pollution Authority, (Ore. Court of Appeals, No. 2, 131, April
29, 1974). The statute involved allowed the air pollution
authority to collect civil penalties for violations of its
regulations by filing its order with the county court. The
order was given the status of a judgment, became a lien on real
property, and execution could issue. Relying solely on Mallatt
the court held there was no violation of separation of powers
as conferring judicial functions on an agency, since orders were
subject to judicial review under the Administrative Procedure
Act.
The Connecticut Supreme Court considered the question
in Wilcox v. Madison, 106 C. 223 (1927), where the plaintiff
claimed that a tax warrant issued by the tax collector was
illegal since it was, in its essentials, a judicial process in
the nature of a final execution allowing levy on goods, chattels
or real estate, and therefore must have judicial sanction.
-------
19
The court found that, "This method of collecting taxes
without recourse to the courts is necessary to the full
execution of the powers of the executive department of the
State, and it is not in violation of the division of powers
made by the Constitution." 106 C. at 231.
The civil penalties collection provision of Subsection
2(h) would appear to fall within the rationale of WiJ.c_o_x.
Furthermore, as in Mazama Timber, orders of the Commissioner
imposing civil penalties are reviewable under Connecticut's
Administrative Procedure Act. There should, therefore, be no
serious problem with validity.
-------
20
THE CIVIL/CRIMINAL DISTINCTION (I)
Connecticut's civil assessment program is likely to be
found civil rather than criminal in nature for four reaons.
First, the program is regulatory rather than punitive.
The assessment serves only to equate the economic statutes
of a non-complying source with that of his law-abiding rivals,
and may be waived upon assurance of prompt compliance. Its
focus is therefore prospective, directed toward the need for
compliance, rather than retrospective, centering upon sanctions
for past activities. Case law indicates that the courts will
declare a statute or regulation to be civil as long as it is
predominantly remedial in character.
Second, the statutory scheme is sufficiently compensatory
in nature to qualify as civil. Although the directly compensa-
tory section of the statute (section one) is not utilized, the
civil assessment section (section two) was clearly viewed by
the General Assembly as interchangeable with it. Moreover,
the civil assessments themselves operate in part as compensa-
tion, albeit inexact, for probable inquiry in a variety of
forms including damage to public goods (the environment:) ,
frustration of public policy and expenses incurred for invest-
igation and enforcement.
Third, the unquestionable intent of the General Assembly
was to make the assessments civil as opposed to criminal.
Fourth, the program meets most of the general (not indi-
vidually dispositive) requirements set forth in the leading
U. S. Supreme Court case dealing with the civil/criminal dis-
tinctiort, Kennedy v. Mendoza-Martinez.
-------
21
Civil/Criminal Distinction I
TO: CPEP Staff DATE: October 31, 1974
FROM: Andy Weissman
SUBJECT: The Enforcement Act and the Civil/Criminal Distinction
I. Introduction
One claim likely to be raised against the Civil Penalties Enforcement
Program is that the underlying statute purports to authorize an
administrative agency to impose assessments which are, in effect,
penal or criminal sanctions. If the claims were accurate, such an
attempted delegation of authority would be invalid, since the Judicial
Branch possesses sole jurisdiction over the application of criminal
sanctions.
This memorandum provides legal support for the contention that
the civil penalties statute is civil in nature, and therefore that
it should be sustained over a challenge based on the alleged criminality
of the civil penalties which the Commissioner is authorized to assess.
II. Two Underlying Lines of Cases on the Civil/Criminal Distinction
Only two U.S. Supreme Court cases directly address the abstract
issue of what factors enter into a determination of the civil or
criminal nature of a statute. Huntington v. Attril, 146 U.S. 657
(1892), involved a case where the Maryland courts had refused to
recognize a New York judgment because it was based upon a New York
statute that was "penal" in nature. The Court stated the test as to
whether a law is penal "in the strict sense" as "whether the wrong
sought to be redressed is a wrong to the public, or a wrong to the
-------
22
individual." This "strict sense" standard has been broadened by later
cases, see United States v. Tucker, 161 U.S. 475 (1896), where a forfeiture
for the fraudulent importation of merchandise was held non-penal
despite the fact that the penalty was triggered by the commission of
a public offense; see Hepner v. United States, 213 U.S. 103 (1909).
Nevertheless, the Huntington doctrine has developed into a rule which
bases the civil/criminal distinction on a compensation standard; that
is, whether plaintiff is recovering damages based in some form on
injuries caused by defendant. See Bolles v. Outing Co., 175 U.S.
304 (1924); Sullivan v. Associated Billposters and Distributors, 6 F.2d
1000 (2d Cir. 1925); United States v. Price, 290 F.2d 525 (6th Cir. 1961);
Banks v. Watrous, 134 Conn. 592 (1948); Lamphear v. Buckingham, 33 Conn.
237 (1866); Pierce v. Albanese, 144 Conn. 241 (1957); Tracey v. New York,
New Haven & Hartford Railroad Co., 82 Conn. 1 (1909).
The other leading case is Kennedy v. Mendoza-Martinez, 372 U.S.
144 (1962), where the Court articulated a list of factors that should
be used to make the civil/criminal distinction:
1. Does the sanction involve an affirmative disability or restraint?
2. Has it historically been regarded as punishment?
3. Does it come into play only on a finding of scienter?
4. Does it promote the traditional aims of punishment: retribution
and deterrence?
5. Is the behavior to which it applies already a crime?
6. Is there a rationally connected alternative purpose other
than punishment?
-------
23
7. Is the penalty excessive in relation to the alternative purpose
assigned?
In reciting these criteria, however, the Court was careful to indicate
that they are secondary considerations subordinate to "the objective
manifestations of congressional purpose," which are the foremost
considerations. The named criteria are relevant only after these
"manifestations" fail to indicate clearly a punitive or remedial intent.
372 U.S. 144 at 168.
With these two cases in mind, it is possible to present the reasons
why the civil penalties statute is civil in nature.
-------
24
III. The Statute Is Civil in Nature Because It Is Regulatory Rather Than
Punitive.
The courts have often tested the criminal nature of a statute by
looking for a punitive intent, and, similarly, have used a remedial or
regulatory purpose to find a statute civil. This factor was among those
listed in Mendoza-Martinez, supra. In addition, the U.S. Supreme Court
has stated this standard in a multitude of other cases. For example, in
Perez v. Brownell, 356 U.S. 44 (1958), the Court held that a statute
providing for the divestiture of citizenship of those voting in a foreign
election was non-penal because there was a valid regulatory purpose:
the control by Congress over potentially embarrassing international
situations. Compare Trop v. Dulles, 356 U.S. 86 (1958), using the same
standard and finding a divestiture of citizenship for wartime desertion
penal in nature. See also United States v. Constantine, 296 U.S. 287
(1935) (both majority and dissenting opinions); Helwig v. United States,
188 U.S. 605 (1903); Flemming v. Nestor, 363 U.S. 603 (i960); United
States v. Shapleigh, 54 Fed. 126 (8th Cir. 1893); Iowa v. Chicago B. S
Q.R. Co., 37 Fed. 497 (C.C.S.D. Iowa 1889); Sullivan v. Associated
Billposters and Distributors, 6 F.2d 1000 (2d Cir. 1925); United States v.
Witherspoon, 211 F.2d 858 (6th Cir. 1954).
The courts have consistently found statutes non-criminal when the
sanctions they impose have the purpose of providing a remedy to an
injured party rather than punishing the defendant. See, e.g., Lapinski v.
Copacino, 131 Conn. 119 (1944); Plumb v. Griffin, 74 Conn. 132 (1901);
and the cases cited in section II, supra. In addition, courts which find
the purpose of a penalty regulatory rather than punitive will declare a
-------
25
statute non-penal in nature. Thus, in Telephone News System, Inc. v.
Illinois Bell Telephone Co., 220 F. Supp. 621 (N.D. 111. 1963), the
Court found that a statutory provision depriving a citizen of the use of
a telephone when he is found using it for gambling purposes was not
criminal in nature because its purpose was not punishment, but rather
the curtailment of professional gambling activities. Compare Hiss v. Hampton,
338 F. Supp. 1141 (D.C. D.Gt. 1972) where the Court held that a statute
eliminating pension benefits for those perjuring themselves before
Congressional committees was criminal because there was no regulatory
purpose, but, to the contrary, the intent of Congress was to punish
these persons. See also United States v. Futura, Inc., 339 F. Supp. 162
(N.D. Fla. 1972).
A few courts have allowed some punitive purpose while still finding
the overall statute civil in nature as long as the basic intent is
remedial or regulatory. Thus, for example, the Court in United States v.
Southern Pacific Co., 162 Fed. 412 (N.D. Calif. 1908), found a statute
providing penalties for cruelty to animals in transport civil even
though punishment was one motive for the provision. And .in Roberge v.
Burnham, 124 Mass. 277 (1878), plaintiffs brought suit for a $100 statutory
forfeiture resulting from the serving of liquor to their minor son. The
Court held that proof beyond a reasonable doubt was unnecessary even
though the seller was being punished:
"True, this action, like all penal actions, partakes somewhat
of the character of punishment; but this does not make it a criminal
prosecution. When the legislature gives to the plaintiff a civil
action, partly remedial in its nature, it is to be presumed that it
is intended that the usual incidents of all civil actions should
attach."
-------
26
The Environmental Enforcement Act itself makes clear that no form of
punishment is intended by the imposition of civil penalties. The
underlying purpose of the statute is the achievement and maintenance
of acceptable environmental and ecological conditions. This is
undoubtedly a valid regulatory function of the State. Every regulatory
scheme involves a detrimental effect upon individuals and businesses
because it most often limits activities that would be in the interest
of those persons or businesses. For example, control over and
licensing of establishments serving intoxicating liquors is traditionally
within the scope of power of the Liquor Control Commission, and the
civil quality of these actions is beyond dispute, Pangburn v. Civil
Aeronautics Board, 311 F.2d 349 (1st Cir. 1962), yet those businesses
violating the rules will suffer either license suspension or license
revocation, with the subsequent loss of livelihood by the owner.
Civil action with these kinds of extreme results is common in
Connecticut and yet provide harsher penalties than the civil assessments
that are authorized under the present statute. See, for example,
Jaffe v. State Department of Health, 135 Conn. 339 (1949); Konia v.
Liquor Control Commission, 137 Conn. 327 (1950); Gibson v. Connecticut
Medical Examining Board, 141 Conn. 218 (1954); Manfredi v. United Air-
craft Corp., 138 Conn. 23(1951).
The non-punitive nature of the civil penalty scheme is made apparent
by § 2(c) of the statute (P.A. 73-665), and this remedial purpose is carried
forward in the Commissioner's interpretation of the act embodied
in the proposed regulations. Section 2(c) of
-------
27
the statute lists the factors to be considered when determining the size
of a civil penalty. The factors mentioned are manifestly not oriented
towards punishment, but rather reflect the regulatory nature of the
scheme. Only two of the seven considerations involve the conduct or
past activity of the source in question [Sections 2(c)(3) and 2(c)(4)],
and the remainder reflect a concern over the effect on the environment
[2(c)(2)]; the financial ability of the source to withstand a pecuniary
penalty [2(c)(5)]; detrimental health effects of the violation [2(c)(6)];
the interference with reasonable uses of other property in the vicinity
[2(c)(7)]; and, most importantly, the most effective method of insuring
immediate and continued compliance [2(c)(l)]. Each of these last five
factors is aimed at regulatory concerns and the quality of the environment
and not at the illegal activities engaged in by a violator.
Section 602(e) of the proposed regulations reflects these same
concerns and indicates that the regulations continue to focus upon
regulatory rather than punitive purposes. But the regulations go further
than this, for in section 602(g)(4-) a mandatory waiver of any penalty is
provided if the detected source submits a reasonably prompt compliance
plan after receiving a warning letter notifying it of the detected
violation. The purpose of the regulations could not be shown more
directly than here: despite a past violation (which a punitive scheme
would penalize under any condition), the Department will waive the
penalty if the source exhibits efforts to cooperate in coming into
compliance. The focus is the need for compliance, not the past activity
of the source. The penalty becomes, therefore, entirely prospective,
while criminal penalties are always retrospective.
-------
28
The method by which the size of any penalty is calculated [see
Section 602(d)] also indicates the non-punitive nature of the assessment.
No assessment will be greater than the advantages that a source has
gained by failing to come into compliance. The most that a penalty can
represent is the taxing away of benefits achieved by violating emissions
• standards or the terms of an order. A purpose to punish would be effectuated
by penalizing activities outside of the law with a pecuniary fine which
achieves retribution and/or deterrence. Here, the assessment serves
only to equalize the economic status of the source with that of those, who have
come into compliance. This scheme is no more punitive than the 6%
annual surcharge upon court judgments that remain unpaid — in both
cases the effort is to place the liable party back into the same economic
position it occupied at the earlier date.
Thu§ even under the harsher of the judicial standards, that is, the foldings,
of those cases which equate a punitive purpose with criminality, the ciyil
penalties statute would be sustained as part of an administrative regulatory
scheme which is remedial in nature. Certainly, then, it is a fprtiori thai;
the statute and regulations pass muster under the broader standard stated i» Roberge.
IV. The Statute Is Civil in Nature Because, It Provides For Compensation,
To the State and the Public.
If a statutory scheme is aimed at providing compensation for losses
incurred then it is not criminal in nature. See discussion in Section
I, supra. The amount of the penalty need not be exactly coextensive
with the harm suffered. Walsh v. Gurman, 132 Conn. 58 (1945). Statutory
penalties "may be...compensatory in their nature, although they embrace
injuries or expenses not included in strict legal damages". Banks v. Watrous,
134 Conn. 592 (1948). See also Doran v. Rugg, 22 Conn. Sup. 189 (1960).
A number of U.S. Supreme Court cases support the contention that
one purpose of the civil penalties statute is compensation to the State
of Connecticut. In Helvering v. Mitchell, 303 U.S. 391 (1938), the
-------
29
Court upheld a 50% tax surcharge for civil tax fraud as non-criminal.
The major reason for finding the proceeding civil in nature was that
"[the sanctions imposing additions to a tax] are provided primarily as a
safeguard for the protection of the revenue and to reimburse the Government
f or the heavy expense of investigation and the loss resulting from
the taxpayer's fraud". In Rex Trailer Co., Inc. v. United States, 350
U.S. 14-8 (1956), the Government attempted to recover civil penalties
after defendant had been fined under a criminal charge concerning the
same activity. Defendant's invocation of the double jeopardy clause was
rejected: the second recovery is civil in nature and not an attempt to
punish defendant again for the same acts. The civil penalty is in the
nature of liquidated damages for losses incurred by the Government. The
damages resulting from the injuries suffered by the Government "may be
difficult or impossible to ascertain" but the penalty provision acts as
a substitute for such a calculation.
United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943) presented
the civil/criminal issue once again in the context of a claimed protection
under the double jeopardy clause. The Court held that penalties incurred
for defrauding the Government were non-criminal because they were compensatory.
It cited Helvering v. Mitchell, supra, as emphasizing "the line between
civil, remedial actions brought primarily to protect the government from
financial loss and actions intended to authorize criminal punishment to
vindicate public justice." The present action was remedial because "we
cannot say that the remedy now before us requiring payment of a lump sum
and double damages will do no more than afford the government complete
indemnity for injuries done it." See also One Lot Emerald Cut Stone and
-------
30
One Ring v. United States, 409 U.S. 232 (1972).
The approach taken in Helvering v. Mitchell, Rex Trailer, Marcus y. Hess,
and Emerald Cut Stones has been expanded and explained in lower courts.
In United States v. 254 U.S. Twenty Dollar Gold Coins, 355 F. Supp. 298
(E.D. Mich. 1973), the Court stated that one of the primary criteria for
testing the criminality of the forfeiture provision was whether the
forfeiture served to reimburse the Government for investigative and
enforcement expenses. Cpntra, see McKeehan v. United States, 438 F.2d
739 (6th Cir. 1971). In Bowles v. Berard, 57 F. Suppl. 94 (E.D. Wisct
1944), the Court held a suit for treble damages by the Administrator of
the Office of Price Administration for a violation of price controls
civil in nature. The Administrator represents the public at large. All
members of the public are damaged by inflation. In addition, the Government
itself, as the purchaser of commodities, is directly damaged by each
unauthorized price inflation. Therefore the action is remedial and not
penal in nature. Contra, see Bowles v. Trowbridge, 60 F. Supp. 48 (N.D.
Calif. 1945).
The compensation standard was fully relied upon in United S,tates v.
Alcatex, Inc., 328 F. Supp. 129 (S.D.N.Y. 19,71), where the Government
sued for a forfeiture under the Trading With the Enemy Act, the forfeiture
being a monetary penalty equal to the value of the illegally imported
goods. The Court held that the action was civil in nature and rejected
a double jeopardy claim by defendants. The Government in cases like
this "may fairly be presumed to have suffered injury." These inj'uries
include, first, the heavy expense of investigating, monitoring and
prosecuting alleged lawbreakers. "It is understandable, and by no means
-------
31
unjust, for Congress to decide that when lawbreakers are caught they
should help to defray the enforcement expenses." Second, the Government
suffers the injury of having its trade, economic and foreign policies
frustrated or impeded. This kind of damage, still real though impossible
to measure, is similar in character to that discussed in Rex Trailer —
to make sure the Government would be made completely whole. "The remedy
does not lose the quality of a civil action because more than the precise
amount of so-called actual damage is recovered."
The civil penalties statute meets this articulated requirement of a
compensatory purpose for a penalty to be civil in nature. First, the
same kinds of investigative and enforcement expenses that were incurred
and relied upon in Helvering v. Mitchell, One Lot Emerald Cut Stones,
25M- U.S. Twenty Dollar Gold Coins, and Alcatex, supra are extant in the
present situation and incurred by the Department of Environmental Protection.
Second, the damage suffered by the public and sued for by the State on
behalf of the public is present here as well, just as it was in Berard,
supra. In fact, the present case is even more apt than Berard with
respect to the need for governmental action on behalf of the public
because here there is no injured party that can bring suit. Thus, the
fact that it is public goods (the environment) that are the object of
protection makes the stance of the State suing on behalf of the public
for damages suffered essential. Third, the damage suffered by the
Government in terms of interference with, and frustration of, valid
governmental policies that was relied on in Alcatex is certainly a major
factor here. There is no doubt that the valid State policy of protecting
the environment is frustrated and impeded by those who refuse to come
-------
32
into compliance with the relevant standards or laws. And fourth, the
statute itself makes clear the compensatory role of civil penalties.
Section one of the Act provides for the recovery of damages by the Sta^e
for injuries to the environment. But section one cannot, by its own
terms, be utilized if civil penalties under section two are also to be
imposed. Thus, the clearly compensatory section is viewed as interchangeable
with the civil penalties section. The General Assembly has simply
allowed the Department some discretion in choosing its mode of remedy,
and has further allowed the Department discretion in formulating the
exact method for utilizing civil penalties. It is only necessary that
one aspect of the penalties be compensatory, and not necessary that the
size of the penalty equal the damage suffered. See United States ex rel.
Marcus v. Hess, supra. And, of course, the guidelines for setting the
size of civil penalties reflect a great concern for compensating
damage suffered. See sections 2(c)(2), 2(c)(6), 2(c)(7) of the statute.
Thus, for a number of reasons, and in the same fashion as has been
articulated in the controlling judicial precedent, the civil penalties
statute and regulations are compensatory in nature and therefore do, in
fact, provide for civil penalties.
V. The Statute Is Civil in Nature Because This Was the Clear Intent
of the General Assembly
In Kennedy v. Mendoza-Martinez, supra, the Court looked first to
the intent of the legislature and thereafter to its list of seven factors
in order to determine whether a statutory provision was civil or criminal,
in nature. This same view was expressed in Helvering v. Mitchell,
-------
33
supra, where the Court relied to some extent on Congress' use of the
words "by distraint" and "by a proceeding in court" to find that "Congress
provided a distinctly civil procedure for the collection of the additional
50 per centum" and that this indicated a clear civil intent, rather than
a criminal sanction. In United States v. Regan, 232 U.S. 37 (1914), the
Court relied in part on the use of the words "sued for and recovered"
and "as debts of like amount are now recovered in courts of the United
States" as evidence of plain contemplation of a civil action. The Court
in United States v. Norfolk, Baltimore and Caroline Line, Inc., 382 F.2d
208 (4th Cir. 1967), declared that the civil/criminal distinction was a
question of statutory construction and that the use of the word "civil"
in a legislative report indicated that the proceedings were civil in
nature. In United States v. J.B. Williams Co., Inc., 498 F.2d 414 (2d
Cir. 1974), the Court stated that "when Congress has characterized the
remedy as civil and the only consequence of a judgment for the Government
is a money penalty, the courts have taken Congress at its word". And in
Olshausen v. Commissioner, 273 F.2d 23 (9th Cir. 1959), the Court stated
that "it has long been settled that Congress may provide civil proceedings
for the collection of penalties which are civil or remedial sanctions
rather than punitive, and provide that the determination of facts upon
which the liability for such a penalty is based may be by executive
officers or administrative agencies". See also United States v. Lebeouf
Brothers Towing Co., Inc., Civ. Action No. 73-915 (E.D. La. 1974);
Telephone News System, Inc. v. Illinois Bell Telephone Co., 220 F. Supp.
621 (N.D. 111. 1963); United States v. Futura, Inc., 339 F. Supp. 162
(N.D. Fla. 1972).
-------
34
The legislative intent behind the civil penalties statute, as
revealed in both drafting and legislative debates, is clearly a desire
for a civil proceeding. First, the penalties are called "civil penalties."
This has some import, as can be seen in Caroline Line, supra.
Second, the commissioner is directed to determine the size of a
civil penalty. This indicates a clear "civil intent" because it is not
possible for an administrative officer to adjudicate the criminal law.
Third, the penalty can become effective without a hearing if defendant
waives this right by simply not responding for 20 days [see Section 2(e)
of the statute]. This procedure would be patently illegal if criminal
penalties were intended.
Fourth, the civil penalty assessed in a final order is to be enforced
in the same manner as a judgment of the Superior Court. This is a civil
procedure for collecting judgments.
Fifth, Representative Wagner, dicussing the statute during the
House debate on May 23, 1973 stated that "this bill decriminalizes these
statutes, and makes it a civil thing, rather than a criminal statute."
Sixth, both Represenative Wagner in the House debate and Senator
Costello in the Senate debate on May 15, 1973 emphasized the regulatory
purpose of the statute. Represenative Wagner: "Presently the procedures
existent and available to the Commissioner are unfair to most companies....
[A] company may comply with an order to abate pollution by making a
capital expenditure, where another company may not, save the capital
expenditure, and tie the matter up in the Courts." Senator Costello:
"We...want to protect the businessman who is honestly complying."
For all of these reasons, the intent of the General Assembly was
-------
35
undoubtedly to create a penalty which was wholly civil in nature.
VI. The Statute is Civil in Nature Under the Mendoza-Martinez Standards.
These penalties do (1) involve an affirmative disability, to wit,
the payment of a monetary sum. This is no more a disability than the
payment of money damages, and much less a disability than license
suspension or revocation, all of which are civil remedies. Thus,
payment of money has not (2) historically been regarded as punishment,
and many cases find penalties non-punitive. See Helvering v. Mitchell;
Rex Trailer; U.S. ex rel. Marcus v. Hess; Emerald Cut Stones; Alcatex;
U.S. v. Zucker; Huntington v. Attril; Hepner v. U.S.; U.S. v. Childs;
Plumb v. Griffin; Lamphear v. Buckingham; etc. The civil penalties
provided under the present statute and regulations do not (3) come into
play only upon a finding of scienter. The operation of the penalties is
purely regulatory, the regulations allowing for a mandatory waiver of
all penalties [ § 602(g)(4) ] for the cooperative source. Therefore
they do not (4) promote the traditional aims of punishment: retribution
and deterrence. The behavior to which the penalties apply is not, generally,
(5) already a crime. There are(6) a number of alternative purposes for
the statute aside from punishment. These include both the financial
protection of sources that spend money to comply with the law, and the
general protection of the environment. And finally, the penalty is
calculated so that it never is (7) excessive in relation to the alternative
purpose assigned. In fact, the regulations provide for a method of
determining the size of a penalty that is attuned directly to equalizing
-------
36
the advantages gained by the non-compliance and ensuring immediate and
effective compliance with the law, thus enhancing the environmental
surroundings.
Thus, under the Mendoza-Martinez standards discussed in § II, supra,
the civil penalty statute and regulations qualify as civil proceedings
rather than criminal prosecutions and would be sustained over a
challenge that they are criminal in nature.
-------
37
THE CIVIL/CRIMINAL DISTINCTION (II)
This memo reiterates the general conclusion of the previous
memo and in addition examines the brief history of the civil/
criminal distinction in Connecticut.
Two nineteenth century statutes entailing enforced deten-
tion were characterized as civil in nature. The first provided
for the detainment of a negligent master for the purpose of
reconciling him with his apprentice, and the second required a
period of forced labor for delinquent taxpayers. In both in-
stances, the courts found that punishment was not the primary
goal.
In a later case, the claim was made that a statute author-
izing recovery of damages caused by a defective road or bridge
was criminal, not civil. The court rejected the claim, but held
that the test for criminality was whether the wrong sought to
be redressed was a wrong to the public or to an individual.
And in a very recent case, a lower Connecticut court
examined a statute which mandated a $5,000 "civil penalty" for
violation of the State Anti-Trust Act. While deciding the case
on different grounds, the court implied that the section in
question would probably be termed "criminal" despite the label
of the General Assembly. It should be noted, however, that this
provision had none of the remedial or compensatory character-
istics of the civil assessment regulations.
-------
38
TO: Glen Gross, David Tundermann
FROM: David Rivers
RE: Civil Penalties
Issue: Is a monetary penalty, as contemplated in P.A. 73-655,
a criminal penalty?
DISCUSSION: (A) The available case law concerning the civil/
criminal penalty dichotomy is far from uniform. In large part
this is due to the many different types of civil penalties that
have been utilized. Besides monetary fines civil penalties in-
clude such acts as revocation, suspension and non-renewal of
licenses, withdrawal of privileges of contracting with the govern-
ment, forfeitures of money or property and divesting of citizen-
ship. I/ To find a workable definition of civil penalty, cases
concerning all of these must be drawn on. Moreover, courts often
classify penalties as civil or criminal with no real indication
as to how the determination was made. In Lees v. U.S., 150 U.S.
476,37L.Ed.1150(1893) an action to impose a penalty (for import-
ing an alien under a contract to perform labor) the penalty was
found to be "unquestionably criminal," but no clear reason for
the decision was given.
On the opposite side, the court in American Smelting and Refining
Co. v. Occupational Safety and Health Review Commission, No. 73-
1721, U.S. Ct. of App., 8th Cir., filed July 15, 1974, dismissed
the issue of whether a $600 penalty,l/ for failure to comply
with OSHA of 1970, was criminal with one line. "Civil penalties
are not uncommon in federal law, and Congress here clearly intended
to create a civil sanction." What is clear, however, is that the
way the penalty statute is characterized on the surface will not be
enough to sustain it as civil. As Chief Justice Warren warned,
"the inquiry must be directed at substance" not labels, Trop v.
Dulles, 356 U.S. 86,93 (1957).
The correct method in penalty cases should be to decide first
whether the penalty is civil or criminal. Only if it is found to
be criminal is it necessary to decide the secondary issue of
whether constitutional rights of criminal procedure were safe-
guarded. If the penalty was determined to be civil, no such
rights would attach. Courts, however, have confused this reason-
ing process, particularly where some statutory peculiarity is
involved. In two similar cases, U.S. v. Tank Barge CTCO Corp.,
No. 72-H-1443, U.S. Dist. Ct., S-D. of Texas, March 21, 1974
1 For discussion of types of penalties see Davis, Administrative
Law, Section 2.13.
2 Assessed pursuant to 29USC Section 666(b).
-------
39
and U.S. v. Lebeouf Bros. Towing Co., No. 73-915, Section "I," U.S.
Dist. Ct., E.D. of La., June 14, 1974, pecuniary penalties were
found to be criminal. Both cases involved statutes concerning
discharges of oil or gas into waterways.3/ In each case it was
sought to impose a monetary penalty. Violators of the statute,
however, were required to report, under threat of criminal sanc-
tions for failure to do so, any spillages. Once reported the
monetary penalty could be invoked. Both courts found the penalty
to be criminal on the basis of this "self-disclosure" provision.
"Self-disclosure" (self-incrimination), however, should not
be used as a criterion in determining whether a penalty is civil or
criminal, but rather it should only be considered after that dey
termination is made. (the Tank Barge court recognized that its
conclusion should be limited to the peculiar situation involved,
and not to civil penalties generally, supra at 11).
In addition, care must be taken when attempting to apply fed-
eral decisions to state laws, since statutes imposing penalties
may be found to rest on particular authority, such as Congress'
absolute power over interstate commerce. (See Antonima Per Anzioni
v. El ting, 287 U.S. 329 (1932); U.S. v. Wrightwood Dairy Co., 315
U.S. 110.
(B) Despite the confusing case law, certain guidelines or "tests'1
may be found. Kennedy v. Mendoza-Martinez 372 U.S. 144 168, (1962)
(involving divesting of citizenship under the Armed Forces Natior}-
ality Act of 1940, 58 Stat. 746) sets forth the traditional test
applied to determine whether a statute is criminal or regulatory as;
(1) whether the sanction involves an affirmative
disability or restraint
(2) whether it has historically been regarded as
a punishment
(3) whether it comes into play only on a finding
of scienter
(4) whether its operation will promote the traditional
aims of punishment-retribution and deterrence
(5) whether the behavior to which it applies is already
a crime
(6) whether an alternative purpose to which it may
rationally be connected is assignable for it
(7) whether it appears excessive in relation to the
alternative purpose assigned.
Rivers and Harbors Appropriation Act of 1899 (33USC Section
407 et. seq.), Federal Water Pollution Control Act (33USC Section
1151 et. seq.)
-------
40
The court admitted that the problem is extremely difficult
and the solution elusive and that, when applied, the tests often
point in differing directions. The court itself did not even
attempt to apply the tests here, merely saying the punitive nature
was "evident."
The Supreme Court has also stated that the criminal/civil
determination should be made by looking to the legislative purpose:
In deciding whether or not a law is penal, this Court has
generally based its determination upon the purpose of the
statute. If the statute imposes a disability for the pur-
poses of punishment—that is, to reprimand the wrongdoer,
to deter others, etc.—it has been considered penal. But
a statute has been considered nonpenal if it imposes a
disability, not to punish, but to accomplish some other legit-
imate governmental purpose. The Court has recognized that
any statute decreeing some adversity as a consequence of
certain conduct may have both a penal and a nonpenal effect.
The controlling nature of such statutes normally depends on
the evident purpose of the legislature. The point may be
illustrated by the situation of an ordinary felony. A
person who commits a bank robbery, for instance, loses his
right to liberty and often his right to vote. If, in the
exercise of the power to protect banks, both sanctions were
imposed for the purpose of punishing bank robbers, the stat-
utes authorizing both disabilities would be penal. But be-
cause the purpose of the latter statute is to designate a
reasonable ground of eligibility for voters, this law is
sustained as a non-penal exercise of the power to regulate
the franchise. Tropp v» Dulles, supra, 96, 97.
Similar reasoning—looking to the purpose behind the statute—
was applied in U.S.v. Futura Inc., 339 F. Supp. 162 (1972), con-
cerning a violation of the Economic Stabilization Act of 1970
for charging rents in excess of the allowable ceiling. The sec-
tion involved provided "whoever willfully violates any order or
regulation under this title shall be fined not more than $5,000."
The court stated that the test most often articulated in determin-
ing if a penalty is civil or criminal is whether the legislative
aim in providing the sanction was to punish the individual for
engaging in the activity involved or to regulate the activity in
question. The court applied this punitive vs. regulatory test
as well as the Kennedy v. Mendoza-Martinez test, supra, and found
that the penalty in question did not involve an affirmative dis-
ability or restraint, that a fine is traditionally regarded as
criminal punishment, that violation of the act was predicated
on a showing or finding of scienter, that it promoted the tra-
ditional aims of punishments-retribution and deterrence, and
was therefore penal, not civil. See also, U.S. v. U.Sv Coin and
Currency, 401 U.S. 715,28 L. Ed. 2d 434 (1970), U.S. y. Krapf,
18 F. Supp. 886 (1960), concerning punishment as a criterion
in determining whether a penalty is criminal.
-------
41
(C) A criterion often used in upholding civil penalties, and of
particular importance where monetary fines are involved, is that
the penalty be remedial. As a concept it is closely akin to the
principle in tort and contract law of "Making the Plaintiff Whole."
Thus, in cases arising under tax law, penalties are upheld as be-
ing remedial sanctions aimed at protection of the revenue and
reimbursing the government for the expense of investigation, see
e.g. Helvering v. Mitchell, 303 U.S. 391 (1937), Alshausen v. Comm'r
of Internal Revenue, 273 F 2d 23 (9th Cir., 1960). To be remedial,
a penalty should function as reimbursement for expenses and resti-
tution for damages, U.S. v. Lebeouf Bros. Towing Co., supra. Al-
though not articulated in the cases, it would seem that arguments
in favor of a penalty being remedial in nature would be enhanced
if the penalty.imposed approximated as closely as possible real
losses in terms of agency expenses and damage to the environment.
Thus, care should be taken in assessing each individual penalty.4/
Likewise, if a penalty is to be considered remedial, it should be
applied to all violations, and not used as a "bargaining tool,"
since to do so could negate the restitution theory. At least one
case, however, upheld a forfeiture penalty as being remedial even
"...though the loss is ordinarily unascertainable," Colaccico
v. U.S., 143 F 2d, 410, (2d Cir., 1944). Where the sanction is
truly remedial, it does not matter that the act giving rise to
the penalty may also give rise to a criminal sanction, Helvering
v. Mitchell, supra, or that there may also be some punitive element
involved, Golaccico v. U.S., supra.
(D) One recent case, based on a statutory provision similar to
that found in P.A. 73-665, illustrates the more forward looking
view toward administrative civil penalties. Ford v. Environmental
Protection Agency, 292 NE 2d. 540, involved the Illinois Environ-
mental Control Act (ILL. Rev. Stat. 1971, Ch. Ill 1/2. The Act
provided for imposition of a penalty not to exceed $10,000 and
an additional penalty not to exceed $1,000 for each day of violation,
for violations of the Act or regulations adopted under it. The
penalty was challenged as being criminal. In upholding the pro-
vision, the court said (pages 54 ff.):
As we view the Act before us in this case, we conclude that
it is to be construed as evidencing that a civil sanction
was intended. No mention of crime or criminal prosecution is
made in the Act, and...the legislature has provided for a
distinctly civil procedure for the collection of the penalties
imposed, thus manifesting its intent that the penalties authorize
are civil sanctions...Administrative impositions of penalties are
There are cases however holding it unconstitutional to authorize
an administrative agency to determine the amount of individual
fines; e.g. Tite v. State Tax Comm'er, 89 Utah 404.
-------
42
common within the State and Federal government structures...
IT] he principle emerging...is that an administrative officer
or agency may penalize, without offending the Constitution,
when the penal function is incidental to the duty of admin-
istering the law..[T]he legislature may grant to the body
charged with the duty of administering a law such authority
and powers as are necessary for the "practical application
and operation of the law" Specifically it is our conclu-
sion that the penalty powers given the Pollution Control
Board are incidental to its duties of administering the law,
and, as such, are quasi-judicial powers which fall outside
the prohibition of the Constitution.5/
(E) Connecticut law on the civil/criminal penalty question is not
well enough developed to allow for predictions as to how the state's
courts would handle the issue. In an early case, Fenn v. Bancroft,
49 Conn. 216 (1881), the court was faced with a statute which allowed
for imprisonment of a master for abuse or negligence toward an apprer
tice. The court found that the object of the statute was to recon-
cile the parties, that the end and object of the statute determines
its character, and that, therefore this was a civil action, rather
than criminal. It was stated that, "No warrant is provided for,
no arrest, and a forthwith process is not required... There is
no public wrong to be punished, no fine and no imprisonment." (The
imprisonment involved in the case was not a sentence, but rather
a detention of the master for reconciliation of the difficulties.)
A later case involved a statute which allowed for a complaint
and the arrest of delinquent taxpayers. The statute provided that
the taxpayer could be jailed, where he would be paid for his labor,
until the delinquency was worked off (not a criminal sentence).
Again, even though jailing was involved, it was held to be a civil
statute, the court saying that the purpose was not punishment, that
it provided for no fine or imprisonment, that delinquency was not
a public wrong, that nothing in the act indicated an intent to make
non-payment of tax a crime, and that the purpose was to provide an
additional proceeding for payment of the tax.
In Borpora v. New Haven, 122 Conn. 80 (1936) the claim was
made that statutes authorizing the recovery of damages caused
by defective roads and bridges was penal. In upholding the statute
as civil, the court stated, that strictly and primarily the words
"penal" and "penalty" denote punishment, whether corporal or pe-
cuniary, imposed or enforced by the State for a crime or offence
against the laws. "The test of whether a law is penal, in the
strict and primary sense, is whether the wrong sought to be re-
dressed is a wrong to the public, or a wrong to the individual."
Significantly, the court found that the purpose of the statute
was to furnish a remedy for the injured party.
The case includes extensive discussion of the related issue
of delegation of judicial functions to administrative agencies.
-------
43
An indication of how Connecticut's courts might handle the
civil penalty issue today might be taken from a recent lower court
case, Mobil Oil Corp. v. Killian, 30 Conn. Supp. 87, 301 A 2d 562
(1973), an action to quash a subpoena duces tecum under the State
Anti-Trust Act. Chap. 624, C.iG.S. Section 35-38 of the Act reads:
Civil penalties for violations. In any action instituted
by the attorney general, any individual who has been held
to have violated this chapter shall forfeit and pay to the
state a civil penalty of not more than five thousand dollars.
The court declined to rule on Section 35-38, since no attempt
had been made to impose a civil penalty and since the validity of
that section would not vitiate the remainder of the act.
The court did state, however, that the legislature could not
confer the power of criminal prosecution on the attorney general
because of the separation of powers doctrine in Article 2 of the
state constitution and, citing State v. Hall, supra, said that
whether a case is a criminal one is not determined from form of
complaint and process alone. The court ruled that "but for the
possible exception of Section 35-38" the Anti-Trust Act must be
construed as a civil statute whose dominating characteristic is
to provide a means of civil redress as well as investigatory tools
for use by the Attorney General. (Emphasis added). The tone
of the decision indicates that had the issue been decided, the
penalty section, Section 35-38, would have been found to be crimi-
nal .
CONCLUSION: To be upheld as civil rather than criminal, a mone-
tary penalty should have some rational connection to a valid reg^
ulatory scheme. In form and in application it should not be puni-
tive. The amount of the assessment should, as closely as possi-
ble, approximate real loss or damage. In Connecticut, however,
this may not be enough.
-------
44
SELF-INCRIMINATION (I)
The Fifth Amendment privilege against self-incrimination
may be invoked only by individuals who incur a "real and apprec-
iable" liability to criminal prosecution on account of the dis-
closure.
This protection applies not only to criminal proceedings
but to technically civil actions which may be designated "quasi-
criminal" in nature. The Department can probably resist this
characterization of its civil assessment hearings on two grounds:
the legislature intended the actions to be civil, and there is
no requirement of proof of a cuplable mental state to establish
liability.
Even if the proceedings are neither criminal nor "quasi-
criminal," the privilege may be invoked if the information ob-
tained is likely to lead to criminal prosecution in a future
proceeding. Since there are state and federal criminal laws
covering several acts for which civil assessments may be imposed,
the privilege may apply in certain cases.
Where records are required to be kept by law, however, the
Fifth Amendment privilege may not be applicable. The recent
trend of Supreme Court decisions suggests that all the record
keeping requirements established by the Commissioner may be
exempted from the protection of the privilege so long as they
serve the valid regulatory purposes of the agency and are not
designed or used to funnel incriminating evidence to prosecutors.
-------
45
Self-Incrimination
Topics Covered
I Use of Right Against Self-Incrimination, Generally
II Use of the Right Against Self-Incrimination to Avoid a Civil Penalty
III Use of the Right Against Self-Incrimination in Avoidance
IV Use of the Right Against Self-Incrimination to Avoid a Criminal Penalty
I General Use
There are tvo sources of immunity from self-incrimination. One is the
5th Amendment of the Constitution of the U.S.: "No person...shall be compelled
in any criminal case to be a witness against himself." The second is any
statutory immunity granted by an appropriate legislature.
In "pleading the Fifth," one must stand ready to establish that there is
a "real and appreciable risk or hazard" of self-incrimination; Leary v. U.S.,
395 U.S. 6 (1969), or that such use is not an "extreme or extravagant
application" of the privilege. Marchetti v. U.S., 88 S. Ct. 697 (1968).
As interpreted by the courts the 5th Amendment right is only available to
individuals and not incorporated or non-incorporated businesses:
The corporation is a creature of the State. It is presumed to
be incorporated for the benefit of the public. It receives
certain special privileges and franchises and holds them subject
to the laws of the State and the limitations of its charter. Its
powers are limited by law. It can make no contract not authorized
by its charter. Its rights to act as a corporation are only pre-
served to it so long as it obeys the laws of its creation. There
is a reserved right in the legislature to investigate its contracts
and find out whether it has exceeded its powers. It would be a
strange anomaly to hold that a State, having chartered a corporation
to make use of certain franchises, could not in the exercise of its
sovereignty inquire how these franchises had been employed and whether
they had been abuses, and demand the production of corporate books
and papers for that purpose.
Hale v. Henkel, 201 U.S. 1*3 (1966). See. George Campbell Painting
Corp. v. Reid, 392 U.S. 286 (1968).
Yet, the Uth Amendment right to protection from unreasonable search and
seizure does apply and necessity must be shown for a corporation to incriminate
itself through its books:
-------
46
In view of the power of Congress over interstate commerce (in
our case of General Assembly over the public trust in the en-
vironment) to which we have adverted, we do not wish to be
understood as holding that an examination of the books of a
corporation, if duly authorized by act of Congress (General
Assembly), would constitute an unreasonable search and seizure
under the ^th Amendment.
Hale v. Henkel, supra, at 77. (parenthetical analogies added);
Boyd v. U.S.. 116 U.S. 6l6, 623.
The principle preventing use of the right against self-incrimination
Hot only applies to public documents...but also to records re-
quired by law to be kept in order that there may be suitable
information of transactions which are the appropriate subjects
of governmental regulation, and the enforcement of restrictions
validly established. There the privilege which exists as to
private papers cannot be maintained.
Shapiro v. U.S., 335 U.S. 1, 17 (19H8); quoting from Wilson v.
U.S., 221 U.S. 36l (1911).
Business records kept under requirement of law by private individuals in
unincorporated enterprises are public documents for purposes of the 5th and
Uth Amendments. State v. Donovan, 10 N. Dak. 203; State v. Davis, 69 S.E. Ppt.
(W. Va.) 639; People v. Coombs, 158 N.Y. 532; State v. Cummins, 76 Iowa 133;
L & N RR Co. v. Commonwealth, 51 S.W. Rep. (Ky.) 167; People v. Kenwood, ^23
Mich. 317; State v. Smith, 71* Iowa 580; Langdor v. People. 133 111. 382; all
cited approvingly in Wilson v. U.S., 221 U.S. 36l (1911). See appendix.
5th Amendment rights are available to businesses when expressly granted
by an appropriate legislature. Individuals have rights against self-incrimin-
ation only in criminal prosecutions from the 5th Amendment. There must be a
statutory grant of immunity for an individual or business to plead a right
against self-incrimination in a civil action. C.f. Le Beouf Case E.D. La.
C.A. #73-915.
II Self-incrimination and Civil Penalties
Unless there is some special provision for statutory immunity, which is
not the case in Connecticut environmental law, there is no right against
self-incrimination in a civil case.
Considering the declared purposes of the Act and the interest of
the government in its enforcement, an action for the imposition
of the sanctions authorized is remedial and not penal in nature,
and the immunity granted, by the 5th Amendment does not come into
play.
Amato v. Porter, 157 F. 2d 719 (2nd Cir. 19^6), an action for treble
damages for violation of maximum price regulations.
-------
47
In Woods v. Robb, 171 F. 2d 539 at 5^1, when a party claimed that "He
could not in a penalty suit "be required to testify against himself" the
court replied,
Nor was this such a suit that the (self-incrimination)...excuse
would fit. The suit involves only civil sanctions, imposed as
deterents rather than punishments...admissions if made could
not have teen used against him in any other proceeding.
Rule 36(b).
The true problem comes in the distinction "between criminal and civil
penalties:
This, though an action civil in form, is unquestionably criminal
in its nature, and in such a case a defendant cannot be compelled
to be a witness against himself.
Lees v. U.S., 150 U.S. Vf6, U80 (a case dealing with collector of
penalties for introductory foreign labor contrary to immigration
laws).
A proceeding to forfeit a person's goods for an offense against
the law, though civil in form, and whether in rem or in personam
is a 'criminal case' within the meaning of that part of the 5th
Amendment which declares that no person 'Shall be compelled in
any criminal cases to be a witness against himself...(Here the
forfeiture of goods could have been included in a criminal judgment)
...If the government prosecutor elects to waive an indictment and
file a civil information against the claimants—that is, civil in
form—can he deprive the claimants of their immunities...? This
cannot be.
Boyd v. U.S., 116 U.S. 6l6, 631* (1889), (action for forfeiture
of illegal importations).
Ill Use of Right Against Self-incrimination in Avoidance of a Criminal
Sanction as a Defense to a Civil Penalty
The 5th Amendment right can be used as a right "not to be criminally
liable for one's previous failure to obey a statute which required an
incriminatory act." Leary v. U.S., 395 U.S. 6.
l_ A/ civil penalty can not be exacted where defendant failed to
comply with law to avoid self-incrimination on criminal charges.
Grosso v. U.S., 88 S. Ct. 709 (a case involving civil prosecution
for penalty for failure to pay gambling tax in a state where
gambling was illegal).
When the forfeiture statutes are viewed in their entirety, it is
manifest that they are intended to impose a penalty only upon
who are significantly involved in criminal enterprises. It
follows from Boyd, Marchetti (88 S. Ct. 697) and Gross that the
-------
48
Fifth Amendment privilege may properly be invoked^ in these
proceedings.
U.S. v. U.S. Coin and Currency, Uoi U.S. 715 (1971). x
These quotes point up the apparent dangers in having both a Criminal
and civil penalty for the same illegal act. Moreover, they show that courts
will block civil penalty awards when an individual fails to comply with the
law in order to prevent self-incrimination and criminal prosecution under
another law. Query whether this is not the case of a civil penalty for
failure to keep emission records which would expose a pollution condition
subject to criminal prosecution.
IV The Right Against Self-Incrimination and a Criminal Penalty
To reiterate for emphasis a private individual always has the 5th
Amendment to use in criminal cases, a corporation does not, and any form
of public business required to keep records does not in relation to those
records. Therefore, even in a criminal case, some parties may be prosecuted
even though they "expose" themselves.
-------
49
State v. Donovan — Records kept by druggist as required by law were public
records and not private records under the 5th Amendment protection.
People v. Coombs — False coroners reports available against him. Public
not private papers.
State v. Cummins — Sales reports of pharmacist could be used against him.
State v. Davis (W. Va.) — Druggist prescriptions are quasi "public documents"
where state requires him to "file and preserve his 'private papers'" and
are thus not protected.
L.N.R.R. Co. v. Commonwealth — Tariff sheet posted as required by law is
public and not private.
State v. Smith — Records of druggist required to be submitted to county
auditor thereby became public.
Langdon v. People — A search warrant allowed certain papers incriminating
forger to be obtained.
The two West citations were Shepardized.
Neither has been overruled.
-------
50
Statutes which evoke potential self-incrimination issue.
Tidal Wetlands
22a-30 Right of entry.
22a-32 Permit filing.
Inland Wetlands - None,
Water Compliance
25-5l*a Records
25-5*vdd Report of oil spill
25-5^ee Liability for oil spill
25-5^ff Liability for removal of oil
25-38 Prison sentence of 30 days for carcass of animal willfully put in
body of water.
25-39 Pollution of drinking H20 - 6 months.
25-^3 Bathing in reservoir - 30 days.
25-50 Penalties for polluting ice - 30 days.
Water Resources
25-Uf Regulations & procedures - self reporting reg. possible.
25-7f Penalty for wrongfully erecting coastal structures and related
activities - 10-30 days.
25-18 Wrongful dredging - 30 days.
Air Compliance
19-508 Self-Reporting procedures.
19-508a Open air burning - 3 months.
19-516 Civil penalty for same offense as 19-508,
Solid Waste - None.
-------
51
SELF-INCRIMINATION (II)
This memo reiterates the general principles of Fifth Amend-
ment application:
(1) In pleading the Fifth Amendment, a party must
establish that there is a "real and appreciable
risk or hazard" of self-incrimination;
(2) The privilege is generally available only to
individuals, not to incorporated or unincorp-
orated businesses;
(3) There must be a statutory grant of immunity for
a person (individual or business) to invoke the
privilege in a civil action;
(4) In conjunction with the Fourth Amendment bar
against unreasonable searches and seizures,
there is a Fifth Amendment privilege against
incrimination from corporate books. But this
applies to private documents, not to those re-
quired to be kept by the General Assembly.
The privilege appears to have direct bearing on the civil
assessment program only when an individual fails to comply with
a civil statute mandating self-reporting in order to avoid self-
incrimination and criminal prosecution under another law. Recent
cases indicate that a civil assessment may not be exacted in this
situation.
-------
52
INTRODUCTIONS AND CONCLUSIONS
Statutory schemes which enable government officials to require the production
of information that can be used to prove criminal violations by the people
producing it may run afoul of the Fifth Amendment privilege against self-
incrimination.* This problem may cause difficulties for the civil penalties
program particularly in the water compliance area. There are state and
federal criminal penalties for certain types of water pollution and the
Department of Environmental Protection can force the production of certain
kinds of information that might incriminate under these statutes. If a court
found that information sought by the Department in a civil penalty case was
protected by the privilege against self-incrimination it would bar the production
of the evidence, overturn any judgment based on it and might overturn the
information statute as unconstitutional.
This problem is limited to a small area, however. Only individuals (not
corporations) can claim the Fifth Amendment privilege. Moreover, even individuals
can be required to produce records "required by law to be kept in order that
there may be suitable information about transactions which are the appropriate
subjects of governmental regulation and the suitable enforcement of restrictions
validly enforced" Shapiro v. U.S., 335 U.S. 1, 17 (19U8). Finally, for
information sought in a civil action to be privileged there must be a sub-
stantial likelihood that it will result in or support prosecution in a criminal
action. Where there are no statutes or established administrative procedures
by which such information passes to criminal prosecutors the courts have been
*They may also contravene the Fourth Amendment protection against unreasonable
searches and seizures, a subject only briefly touched on in this memorandum.
-------
53
reluctant to apply the privilege.
Analysis
The source of the privilege agiinst self-incrimination is the Fifth Amendment
to the U.S. Constitution which states that "no person...shall be compelled
in any criminal case to be a witness against himself." The Fifth Amendment
applies only to the federal government. As a result of the Fourteenth
Amendment the states must also respect the privilege and the same standards hold
at the federal and state levels. Mallory v. Hogan, 378 U.S. 1 (1963).
The short constitutional statement upon which the privilege is based has
given rise to a complex legal doctrine that can perhaps be best understood
by looking at each facet of it in terms of present constitutional law.
No person.
The privilege against self-incrimination applies only to individuals or "natural
persons." Such legal "persons" as corporations, labor unions, partnerships
and other associations have been held to be outside the protection of this
part of the Fifth Amendment.
It has long been settled in federal jurisprudence that the
constitutional privilege against self-incrimination is
"essentially a personal one, applying only to natural in-
dividuals. It cannot be utilized by or on behalf of any
organization, such as a corporation." U.S. v. White, 322
U.S. 6U9, 698-9 (19^U) /labor union?"; see also Essgee Co. v.
U.S., 262 U.S. 151 (1923), Wilson v. U.S., 221 U.S. 36l, 382-5
-------
54
(1911); Hale v. Henkel. 201 U.S. 1*3, 7^-5 (1906). Material
in "brackets added.
Campbell Printing Corp. v. Reid, 392 U.S. 286 (1968). See also U.S. v.
Silverstein, 311* F. 2d 789 (1962) (2nd Cir.) cert den'd 37^ U.S. 807 (1963)
(partnership denied privilege).
Corporate officials are also denied the privilege against self-incrimination in
certain cases. Corporate records may be used to incriminate corporate officials,
even those who kept the records. Those officials are merely custodians of the
records. U.S. v. White, supra, and Wilson v. U.S., supra. On the other hand,
corporate officers have "been alloved to refuse to answer interrogatories
directed to the corporation even though the corporation has no privilege. U.S.
v. Kordel, 397 U.S. 1, 7 (1969) and cases cited therein. Thus the courts have
drawn a distinction between corporate records that might incriminate a corporate
officer and an officer's unrecorded knowledge of his or her activities.
It should be noted that while corporations are not protected by the Fifth Amend-
ment privilege against self-incrimination, they do appear to be protected by
the Fourth Amendment's prohibition against unreasonable searches and seizures.
Hale v. Henkel, 201 U.S. Us, 76 (1906). In that case the court held that a
subpoena duces tecum issued to a corporation by a federal grand jury was so broad
as to violate the corporation's Fourth Amendment rights. This subject is beyond
the scope of this memorandum, but may warrant further investigation.
In addition there is another avenue by which corporations may escape the
production of certain types of information. Some courts have held that
statutes requiring the production of certain types of information by persons
-------
55
about the impact on the environment of their activities could not have in-
tended that the information be used in criminal actions because that would
discourage the production of the information. U.S. y. Republic Steel, 1*91
F. 2d 315 (197^) (6th Cir.), This question is beyond the scope of this
memorandum, but will be discussed in a later one.
....shall be compelled...
The privilege against self-incrimination applies to involuntary production of
information by the person who fears incrimination. The privilege caq be waived
by failure to claim it at the time the "testimony" is sought. U.S. v. Kprdel,
397 U.S. 1 (1969), Sullivan v. U.S., 27H U.S. 259 (1927). The privilege is in-
tended to protect individuals from being forced to divulge incriminating in-
formation about themselves. In Couch v. U.S., 1+09 U.S. 322 (1973), the
court held that the privilege did not apply to personal records that had been
placed in another person's custody and remained there for a long period of time.
It reasoned that the privilege only applied where the compulsion of the state was
exerted on the person likely to be incriminated. Where a person clearly
quished custody of the information in a way that suggested an intention to
up control over it the government pould compel the holder of the information
to produce it.
...in any criminal case....
There are two questions of interest raised by this segment of the constitutional
provision. The first is what qualifies as a criminal case. The second is
whether the privilege can be claimed only ip a proceeding of this type* The
courts have used a rather broad definition of "criminal case" in applying the
-------
56
Fifth Amendment privilege. They have extended its coverage to certain types
of non-criminal cases that involve forfeitures of property or money penalties,
labelling them quasi-criminal. However, there are crucial differences "between
the type of action that has been designated quasi-criminal and the civil penalty
actions provided for by Section 2 of Public Act 73-665.* Even though the
civil penalty actions are not quasi-criminal the privilege can still be claimed
in them. The privilege against self-incrimination can be asserted in any sort
of action, not only those criminal in form, so long as the information protected
creates sufficient danger of incrimination in some proceeding. There are
criminal penalties for some of the same acts for which civil penalties can
be assessed, so the privilege can be asserted in civil penalty cases involving
those acts by persons who qualify for its protection.
The courts have long held that certain civil proceedings are criminal in nature
and that persons involved in those proceedings are entitled to the protection
of the privilege against self-incrimination. These proceedings have been
labelled quasi-criminal. The standards for determining whether a civil
sanction is quasi-criminal are not clear cut. There is, however, one con-
sideration that appears to be of paramount importance. Civil penalty actions
have been labelled quasi-criminal by the Supreme Court in forfeiture cases
where the acts giving rise to the forfeiture were also violations of criminal
laws. Not only the physical act but also the mental state punished by the
criminal provisions have been required for application of the forfeiture
provision in the quasi-criminal cases. The premier early case in which the
*If the civil penalty actions were found to be criminal and not civil or quasi-
criminal, the privilege would apply. However, they would also in all probability
be voided as an unconstitutional delegation of judicial power to an administrative
agency. This broader question is discussed in another memorandum.
-------
57
Fifth Amendment vas upheld in a civil enforcement case vas Boyd v. U.S., 116
U.S. 6l6 (l886). That case grev out of a forfeiture action "brought under
section 12 of the Act of June 22, 1871*, 18 Stat. 186. The Act provided that
anyone who "with intent to defraud" the revenue brought goods into this
country under a false invoice or other paper or wilfully did any act or omission
which deprived the United States of lawful customs revenues was liable for a
fine and/or imprisonment and forfeiture of the goods in question. The defendant
in a forfeiture action under this section was compelled, over objection, to
produce the invoice which accompanied the imported goods to be forfeited pursuant
to section 5 of the act. Section 5 mandated the production of such documents in
non-criminal cases concerning fraud against the customs revenues. The U.S.
Supreme Court overturned the judgment in the forfeiture action and declared
section 5 unconstitutional and void. It held that the provision was repugnant
to the Fourth Amendment protection against unreasonable searches and seizures
and the Fifth Amendment privilege against self-incrimination.
The Court labelled the forfeiture action quasi-criminal. It based this ruling
in large part on the fact that the elements of the forfeiture action were ex-
actly the same as those giving rise to the criminal penalties in all respects.
These fines, imprisonment and forfeiture are the penalties affixed
to the criminal acts; the forfeiture sought by this suit being one
of them. If an indictment has been presented against the claim-
ants, upon conviction the forfeiture of the goods could have been
included in the judgment (ll6 U.S. at 63*0.
The forfeiture provision was set out in the same sentence as the criminal
penalties in the act. The act provided that a violator "shall for each offense
-------
58
"be fined in any sum not exceeding $5,000 nor less than $50, or "be imprisoned
for any time not exceeding tvo years, or both, and in addition to such fine,
such merchandise shall be forfeited" (ll6 U.S. at 6l7). Thus the forfeiture
action was clearly a part of the punishment for criminal acts. The court did
not conclude that the forfeiture action vas a criminal action.* Instead it
established a half-way case, civil in form but sufficiently criminal to activate
the constitutional protections against unreasonable searches and seizures and
involuntary self-incrimination.
In its decision in Boyd the court relied on Coffey v. U.S., 116 U.S. 1*36 (1886),
in which it held that an acquittal in a criminal prosecution was a bar to a
civil action for forfeiture based on the same acts. In that case as in Boyd
the same acts and intent were required to establish both the forfeiture case
and the criminal case. (See 116 U.S. at M*2, M*3) Thus, the type of civil
penalty first labelled quasi-criminal by the court was one in which the acts
punished also were violations of criminal laws. See also Lees v. U.S., 150 U.S.
U?6 (1893) in which the Supreme Court again held a civil penalty provision to be
quasi-criminal and overturned a judgment for the government in a case in which a
defendant was compelled to testify against himself. In this case, the United
States obtained a judgment against Lees for $1,000 "as a forfeit and penalty"
for a violation of an act prohibiting the "importation and migration of
foreigners and aliens under contract or agreement to perform labor" in the United
States. (150 U.S. at kjQ} The act also provided for a criminal proceeding to
recover a fine of like amount. The court reversed the judgment because Lees had
been compelled to testify against himself on trial.
*If it had been a criminal action, the statute would hot have allowed the U.S.
to compel production of the document.
-------
59
The doctrine established in Boyd has unquestioned vitality today. In U.S. v.
U.S. Coin and Currency, 1*01 U.S. 715 (1971) the Supreme Court reaffirmed the
Boyd rule. This case was an action for forfeiture of money used in violation
of federal anti-gambling statutes. The money had been found in the possession
of a person arrested for and convicted of violating federal lavs requiring
gamblers to register and pay a tax. These laws had subsequently been held
unconstitutional as applied to persons such as this one who properly asserted
"their privilege against self-incrimination as a ground for their failure to
comply with...the gambling tax law," Udl U.S. at 7l6, 717. Marchetti v. U.S.,
390 U.S. 39 (1968) and Grosso v. U.S.. 390 U.S. 62 (1968). The government
argued that the forfeiture proceeding was not barred because it was directed
not at any person but at the money involved and that it would succeed whether
or not that person was guilty of criminal violations. The court rejected that
argument because federal law provided for individuals innocent of criminal acts
to recover from the government forfeited property.
When the forfeiture statutes are viewed in their entirety, it
is manifest that they are intended to impose a penalty only
upon those who are significantly involved in a criminal enter-
prise. It follows from Boyd, Marchetti, and Grosso that the
Fifth Amendment's privilege may properly be invoked in these
proceedings. ^01 U.S. at 721, 722.
Thus, the Fifth Amendment protection against self-incrimination applies to
civil penalty actions (forfeitures) aimed at acts that violate all the elements
-------
60
of criminal laws.*
While Boyd lives on, it has not been extended to areas beyond its original
facts.** In a number of cases over the decades since Boyd, defendants in
civil penalty actions sought the protection of some constitutional safeguard
for criminal defendants other than the privilege against self-incrimination
or the protection against unreasonable searches and relied on Boyd. In each
case the court distinguished Boyd. It relied on several factors. One is
whether the statutory language is of the type normally associated with civil
or criminal actions. Another is whether the penalty is remedial and related
to the enforcement of a valid regulatory scheme or punitive. Another is the
difference in breadth of the protection claimed from that of the privilege
against self-incrimination. Finally, the Court has also relied on the fact
that in some cases the acts giving rise to the civil penalties, unlike those
in Boyd, included some, but not all, elements of criminal offenses.
Hepner v. U.S., 213 U.S. 103 (1909) was an action to recover a statutory
penalty (Act of March 3, 1903, 32 Stat. 1213, 1214, c. 1012) for unlawfully
assisting the immigration of aliens who had signed labor contracts. The
question at issue was whether the trial court could direct a verdict because
undisputed testimony established a violation of the statute. The Court held that thi
*See also One 1958 Plymouth Sedan v. Pennsylvania, 380 U.S. 693 (1965). This
was another forfeiture case in which the act penalized included the intent
necessary to violate criminal law. Here the Supreme Court held that the defendant
was entitled to the Fourth Amendment protection against unreasonable searches
and seizures.
**This is a limited foray into an area covered more thoroughly in the memorandum
on the distinctions between civil and criminal penalties.
-------
61
action was basically civil and that the court could direct a verdict. In
reaching its decision on the civil nature of the action the Court stated that
a "certain sum or one which can readily be reduced to certainty," that is a
penalty for violation of a law, "may be recovered in a civil action even if
it may also be enforced in a criminal proceeding unless the statute clearly
indicates that only a criminal recovery is possible." 213 U.S. at 108. Because
the statute described the proceeding to recover the penalty in terms generally
used with civil proceedings (the penalty amount could be "sued for," it was
referred to as a debt, the proceeding was referred to as an action, 213 U.S.
at 109), the Court determined that it did not mandate a criminal proceeding.
In U.S. v. Regan, 232 U.S. 37 (191*0 the Court was confronted with the question
of the standard of proof in cases under an amended version of the act involved
in Hepner. One seemingly important amendment was the inclusion in the statute
of the statement that violation of the act "shall be a misdemeanor." 232 U.S.
at 1*0. The court discussed cases, including Hepner, in which constitutional
protection for criminal defendants was denied to defendants in assessing
civil penalties for acts for which criminal penalties were also possible. The
Court then looked to the statutory language which described the action in terms
generally used concerning civil actions (232 U.S. at U8) and determined that
the proceeding was civil and the standard of proof was a reasonable preponder-
ance of the proof and not proof beyond a reasonable doubt. Boyd and Lees were
distinguished because the "guaranty...against compulsory self-incrimination...
is of broader scope than are the guarantees in Article III and the Sixth Amend-
ment governing trials in criminal prosecutions." 232 U.S. at 50.
-------
62
In Helvering v. Mitchell, 303 U.S. 391 (1938) the court held that action for a
5055 penalty for fraudulent understatement of tax liability was civil in nature
and did not give rise to double jeopardy vhere the defendant had "been acquitted
of a criminal charge based on the same acts.
The court introduced a distinction between remedial and punitive sanctions. It
held that the 50$ add-on was "provided primarily as a safeguard for the protection
of the revenue and to reimburse the government for the heavy expense of in-
vestigation and the loss resulting from the taxpayer's fraud." (303 U.S. at i*0l)
It noted that penalties had long been collected civilly and that constitutional
guarantees governing the trial of criminal prosecutions did not apply. (303
U.S. at 1*02-UOU) Boyd and Lees were distinguished using the argument from Regan
that the privilege against self-incrimination is broader in scope than the
protection of Article III and the Sixth Amendment. (303 U.S. 1+00, n.3.) Helvering
v. Mitchell also laid the ground work for the limitation of quasi-criminal
status to civil penalties for complete violations of the criminal law. In a
dictum it noted that the degree of proof required for a criminal action (proof
of intent) was not required for assessment of the 50$ penalty and that this
distinguished the case from Coffey v. U.S., supra.
In U.S. ex rel Marcus v. Hess, 317 U.S. 537 (19^3) the court held that a qui tarn
action for recovery of money obtained from the U.S. was civil. It relied
primarily on the remedial/punitive distinction laid out in Helvering. The
statute providing for the qui tarn action also set out criminal penalties. The
defendants in a qui tarn action had earlier been convicted of criminal violations
and fined. The court held that there was no double jeopardy problem. The qui
tarn proceedings were said to be remedial and civil in spite of the fact that the
-------
63
recovery vas more than tvice the actual damage and the statute used the language
"forfeit and pay." (317 U.S. at 5U8-551) In draving this distinction the
Court noted that the size of the penalty in question (double damages plus
$2000) vas not clearly in excess of the actual loss and expense of the
government and therefore was not punitive. It also noted that the "words
'forfeit and pay1 are wholly consistent with a civil action for damages"
(317 U.S. 550, 551).
The third standard for distinguishing Boyd from other civil penalty cases is
found in One Lot Emerald Cut Stones v. U.S., 1*09 U.S. 232 (1972). This case
involved a forfeiture proceeding against one who had been acquitted of criminal
charges for bringing certain jewelry into the country without submitting to
the required customs procedures. The Supreme Court held that neither collateral
estoppel nor double jeopardy barred the forfeiture action. There was no
collateral estoppel because the criminal action might have been defeated
because of a failure to prove the requisite intent, while no showing of intent
was necessary to prove the civil case. There was no double jeopardy problem
because the forfeiture was a civil sanction. It was said to provide a reasonable
form of liquidated damages to the government, although it was only tenuously
related to the loss in customs revenue and enforcement expense. Boyd was dis-
tinguished on the basis of the emphasis given in U.S. v. Coin and Currency,
Uoi U.S. 715, 718, to the fact that the Boyd penalty applied to a full-fledged
criminal offense while the penalty here was for acts without criminal intent.
These cases lead to the conclusion that the civil penalty provisions of Public
Act 73-665 are not quasi-criminal. The legislature clearly intended the actions
to be civil in form. Most important, there is no requirement of proof of any
-------
64
culpable mental state to establish liability for civil penalties.* Thus, the
civil penalty provisions of section 2 of Public Act 73-665 are not quasi-criminal
for the purpose of the privilege against self-incrimination of the Fifth Amend-
ment. This does not, hovever, mean that persons called upon to provide in-
formation in civil penalty actions under that section cannot invoke the
Amendment's protection.
The privilege against self-incrimination can be invoked in many instances in
which the government seeks to compel testimony or the production of information
in proceedings that are neither criminal nor quasi-criminal. The key question
is not whether the proceeding in vhich the privilege is claimed is criminal,
but whether the information sought is likely to subject the claimant to criminal
liability. Thus the Fifth Amendment privilege may be claimed in a civil action,
U.S. v. Kordel, 397 U.S. 1, 7 (1969), and cases cited therein, or in a statutory
inquiry. Malloy v. Hogan, 378 U.S. 1 (1963). It can be claimed in an action
in a Jurisdiction in which there is no possibility of criminal prosecution, if
the protected information is likely to incriminate the claimant in another
jurisdiction. Thus, the U.Si Supreme Court has held that a state can't compel
testimony of a person who has been granted immunity from state prosecution,
where there was a likelihood that the information would be used against the in-
dividual in a federal criminal prosecution. Murphy v. Waterfront Comm'n, 378 U.S.
58 (196U). In addition, individuals required to report certain types of in-
formation to government agencies pursuant to a regulatory scheme can exercise
the privilege and refuse to report if there is sufficient likelihood that the
*This is in contrast with provisions of Chapter VfHa, Title 25, Section 25-5Ug
of the water resources law which provides both civil and criminal penalties
for wilful or negligent violations of any provision of Chapter
-------
65
information will incriminate them. U.S. v. Sullivan. 272 U.S. 259 (1927);
Marchetti v. U.S., 390 U.S. 39 (1968); Leary v. U.S., 395 U.S. 6 (1969).
The privilege against self-incrimination can be claimed in civil penalty
proceedings because there are state and federal criminal lavs that apply to
acts that also violate the civil penalty provisions.
The Department of Environmental Protection is empowered by Chapter VrUa, Title
25 of the Connecticut General Statutes to compel the production of certain types
of information and the keeping of certain kinds of records. The Commissioner
can hold hearings required by the provisions of Chapter UjUa, Title 25 of the
C.G.S. at which he can take testimony and subpoena witnesses and evidence (Section
25-5^c(g)). The Commissioner can require "the submission of plans, specifications
and other necessary data for... pollution abatement facilities and disposal systems."
(Section 25-5'*c(h)). In addition the Commissioner may require any person or
municipality to keep "such records relating to pollution, possible pollution or
the operation of pollution abatement facilities as he deems necessary to carry
out" his powers to combat water pollution. The Department has access to such
records and can compel their production (Section 25-5l*d). These provisions for
obtaining information may be very important in the administration of the civil
penalties program.
There are criminal penalties for water pollution control. Section 2(a)(2) of
Public Act 73-665 provides for civil penalties for "deposit, placement, removal,
disposal, discharge or emission of any material or substance" in violation of a
number of statutory provisions including a number from Chapter 1*39, Part II of
Chapter kfb and Chapter hfha. Of the C.G.S. Section 25-5Uq of Title 25,
-------
66
Chapter Vf^a of the C.G.S. establishes criminal penalties (fine and/or imprison-
ment) for wilful or negligent violation of the same provisions of Chapter 1*39
and any provision of Part II of Chapter Vfh or Chapter Vj^a. Federal statutes
establish criminal penalties that are roughly the same as the state penalties
for wilfully or negligently violating various water quality standards. 33 USC
1319 (c)(l). These penalties cover many of the same acts that are covered by
the state penalties. Thus, information sought for civil penalty proceedings
may be protected if it incriminates under these state and federal statutes.
The courts have relied on a general standard for deciding whether the likelihood
of incrimination is sufficient to warrant exercise of the privilege. The
standard is stated thus: there must be a "'real and appreciable1 and not
merely 'imaginary and insubstantial1 hazard of self-incrimination." See for
instance Marchetti v. U.S., 390 U.S. 39, ^8 (1968); Rogers v. U.S., 3^0 U.S. 367,
(1951); Brown v. Walker, l6l U.S. 591, 599-600 (1896).
....to be a witness against himself.
The protection of the Fifth Amendment privilege against self-incrimination
extends only to cases in which there is a substantial likelihood that the in-
formation in question will incriminate the person seeking the protection. The
information in question must be personal to the claimant. One person cannot refuse
to divulge information because it might incriminate another. The privilege does
not apply to records that a government agency requires a person to keep pursuant
to a valid regulatory program. Such "required records" are held to be public in
nature, not private, and the privilege only extends to the latter class of in-
formation. Records that the Connecticut water pollution laws mandate may well
be public, and thus not under the protection of the Fifth Amendment. The privilege
-------
67
against self-incrimination does not apply to any material which could possibly
lead to incrimination.
The "required records" doctrine was established in Shapiro v. U.S., 335 U.S. 1
(19^8). This case involved a criminal prosecution for violation of the reg-
ulations of the federal Office of Price Administration in which the defendant had
been compelled over objection to produce certain records which the OPA statute
mandated. The court held that the privilege against self-incrimination was
not applicable to
records required by law to be kept in order that there may be
suitable information of transactions which are the appropriate
subjects of governmental regulation, and the enforcement of
restrictions validly established. There the privilege which
exists as to private papers cannot be maintained. 335 U.S. at
17 quoting from Wilson v. U.S., 221 U.S. 361, 380 (I91l)» see
also Heike v. U.S., 227 U.S. 131, 1^3 (1913).
The court distinguished "required records" from private records with three
criteria. The former were required to be kept by appropriate legislation.
They were of unquestioned relevance to the lawful purposes of the agency
involved. Finally the records in question related to transactions that could
be undertaken only with a government license. 335 U.S. at 32-1*3. It mentioned
examples of cases in which private unincorporated business people could be re-
quired to produce records mandated by statutes when on trial for criminal violations„
335 U.S. at 17-18. These cases involved the statutorily required records of
*These cases were cited with approval in a dictum in Wilson v. U.S., 221 U.S.
361, 381 (1910).
-------
68
druggists, State v. Donovan, 10 N. Dak. 203, 7** Iowa 580; State v. Cummins, 76
lova 133j State v. Smith, a coronerj People v. Coombs, 158 N.Y. 532, and a
railroad, L & N RR Co. v. Commonwealth, Ky. 51 S.W. 167. See also, U.S. v.
Resnick, U88 F. 2d 1165 (197^)(5th Cir.), in vhich the record-keeping provisions
of the federal firearms lav were upheld as required records under the Shapiro
doctrine, U.S. v. Kaufman, U29 F. 2d 2^0 (1970)(2nd Cir.) in which a registered
broker-dealer was required over objection to produce records required by S.E.C.
regulations; Fairbanks v. Hardin, U29 F. 2d 26k (1970)(9th Cir.) in which a
registered livestock dealer was denied the privilege concerning required records;
and U.S. v. Webb, 398 F. 2d 553 (l968)(Uth Cir.) in which there was held to be
no privilege concerning records kept by a carrier pursuant to regulations
under the motor carrier act.
In more recent years the Supreme Court has emphasized somewhat different aspects
of Shapiro. In Marchetti v. U.S.. 390 U.S. 39, 57 (1968) and Grosso v. U.S.,
390 U.S. 62, 67, 68 (1968) the court identified the following three basic elements
of Shapiro: first, records required were of the same kind as he customarily
kept, second, the records had public aspects analogous to public documents, and
third, the information requirements were imposed in an essentially non-criminal
and regulatory area of inquiry. This could be read as a limitation on the Shapiro
doctrinee The first criterion suggests that record keeping requirements are
limited by such regulatee's normal record keeping practices. This could not have
been the intent of the court and in fact neither Marchetti nor Grosso dealt with
situations at all similar to that one. Both cases involved record keeping and/or
registration provisions in large measure designed to be or used as tools for
uncovering criminal violations. It is unlikely that the court would move from
the position that such record requirements were void to the position that records
-------
69
could not "be required to be kept concerning activities of basically regulatory
interest just because the regulatee kept no such records himself.
The Shapiro doctrine may eliminate a. major area in which the Fifth Amendment
privilege might be invoked in civil penalty proceedings. It could exempt all
record keeping requirements established by the Commissioner under Chapter Vr^a,
Title 25, Section 25-5^d, from the protection of the privilege as long as they
serve the valid regulatory purposes of the agency and are not designed or used
to funnel incriminating evidence to prosecutors.
The final major issue of importance in self-incrimination cases is the degree
of danger of incrimination needed before the privilege can be invoked. Where
there is no danger there is no privilege. However, the danger need not be
direct. It need only be "real and appreciable" not merely "imaginary and
unsubstantial." The court has found the former criterion to be satisfied
primarily in cases in which the reporting requirement serves to identify
one as part of a class "inherently suspect" of criminal activities. Where
the reporting requirement applies to the public at large or to broad segments
thereof and is not by policy used to identify members of those groups guilty
of criminal acts the court has tended to find the danger of self-incrimination
to be of the latter type. Where there is no danger of incrimination the privilege
cannot be invoked. Thus, if the only liability that can ensue from the production
of certain information is civil, the courts will not uphold a refusal to come
forth with the information. Amato v. Porter, 157 F. 2d 719 (lpU6)(2nd Cir.),
Woods v. Robb, 171 F. 2d 539 (19^8)(5th Cir.). There must be a statutory grant
of immunity for an individual or corporation to plead the right of self-incrim-
ination where there is danger only of civil liability. See Lebeouf, La. D.A.
-------
70
#73-915; on the other hand, where there is a valid grant of immunity from any
criminal prosecution against which the Fifth Amendment would protect there is
no constitutional privilege against self-incrimination.
In Brown v. Walker, l6l U.S. 591 (1896) the privilege was not allowed in an
ICC proceeding because an immunity statute provided protection of scope equal to
that of the Constitutional provision. Brown was reaffirmed and followed in Ullman
v. U.S., 350 U.S. k22 (1956) in which the court sustained a conviction for contempt
for refusal to testify about subversive activities where an immunity statute pro-
vided protection as broad as that of the privilege. See Connselman v. Hitchcock,
1U2 U.S. 5^7 (1892) and Albertson v. SACB, 382 U.S. 70 (1965) for decisions hold-
ing immunity statutes to be too narrow to inactivate the privilege.
The privilege against self-incrimination extends to information which could
not be the basis of a criminal conviction, but which could furnish "a link in
the chain of evidence" needed to prosecute. Hoffman v. U.S., 3Ul U.S. kjQ (1951).
In Hoffman the court overturned a conviction of contempt for a refusal to answer
grand jury questions that did not ask for direct evidence of criminal activities
but merely of association with known criminals. See also Marchetti v. U.S.,
390 U.S. 39, W (1968).
The question of how serious a danger of self-incrimination is necessary to act-
ivate the Fifth Amendment privilege is one with which the Court has had some
difficulty. Before attempting to identify the key issues it would be wise to
review the major cases.
In Sullivan v. U.S., 27^ U.S. 259 (1927) the court refused to overturn a conviction
for failure to file an income tax return. Sullivan had raised the defense that
-------
71
because his income was derived from illegal activities the return would in-
criminate him. The court held that whatever the incriminating effect of
specific questions in the return, the return could clearly "be filed without
incrimination. The privilege could and should be raised with regard to specific
items. Moreover the court argued that Sullivan's approach would make the tax-
payer the sole arbiter of the validity of a claim of privilege, an unacceptable
result.
In Albertson v. S.A.C.B., 382 U.S. 70 (1965) the court overturned an order of
the Subversive Activities Control Board that the petitioners register as members
of the Communist party. The court distinguished Sullivan and held that the
registration requirement was directed at "a highly selective group inherently
suspect of criminal activities" and that the privilege was asserted not "in an
essentially non-criminal and regulatory area, but against an inquiry into an
area permeated with criminal statutes" (382 U.S. at 79)« The Court also argued
that here, unlike the situation had the privilege been recognized in Sullivan,
the petitioner was not the final arbiter on the question of the application.
The Board had passed on the question.
In Marchetti v. U.S.. 390 U.S. 39 (1968) and Grosso v. U.S., 390 U.S. 62 (1968)
the court expanded on the Albertson case. Both cases involved convictions for
failure to pay gambling taxes. (There was some difference in the taxes involved
in the two cases. In addition, in Marchetti there was a registration provision
not involved in Grosso.) In both cases the court overturned the conviction but
refused to overturn the statutes. It was careful to distinguish Sullivan and
Shapiro. The court argued that to file any gambling tax return would subject the
petitioners to a "real and appreciable" danger of self-incrimination. This was
-------
72
because gambling and/or associated activities violated a criminal law of all
states and the federal government. In Marchetti, the statute required lists of
those registering and paying the gambling tax to be published and made available
to law enforcement officials. In Grosso there was no such requirement, but the
transmission of information was not prohibited either, and in fact there was a
well-established policy of forwarding the information to law enforcement officials,
As has been noted above, the court distinguished Shapiro. It noted that in these
cases the records were required of a "selective group inherently suspect of
criminal violations, and not part of an essentially non-criminal and regulatory
area" as was the case in Shapiro. Marchetti, 390 U.S. at 57. In addition, the
requirements were, unlike those in Shapiro, without public aspects and directed
to records of a kind not customarily kept by the petitioner. The doctrine of
Marchetti and Grosso has also been extended to the laws involving registration
requirements for firearms, Haynes v. U.S., 390 U.S. 85 (1968) and transactions
in marijuana, Leary v. U.S., 395 U.S. 6 (1969).
In these cases the key question is whether the statute is designed and used
primarily as a tool for enforcement of criminal laws or the operation of a
valid regulatory scheme.
-------
73
II STATUTORY ISSUES
-------
74
STATUTORY INTERPRETATION
The Connecticut courts look beyond express statutory author-
ity and will uphold regulations which further the basic purposes
of a statute and conform to its general approach.
In testing for conformity, the courts will look first to
the "plain language" of the act. A conflict with the plain
language will invalidate the regulations unless a literal applic-
ation of that language will lead to "bizarre" and "unsupportable"
results. If the statute is not plain, but ambiguous, the courts
will employ a number of tests, including an investigation of
the statute's legislative history, and will give special consider-
ation to the agency's interpretation, particularly if it is long-
standing. If the statute is remedial in nature, it will generally
be permitted a broad application.
If the statute is penal, in the sense that it defines for-
bidden acts, the courts will construe it strictly. However,
since the Enforcement Act does not delineate impermissible
conduct, but merely provides an additional remedy for that con-
duct, this rule of construction is not applicable.
-------
II. A, INTRODUCTION 75
TO: CPEP Staff DATE: November 7, 1974
FROM: Glen Gross
STATUTORY AUTHORITY AND RULES OF JUDICIAL
INTERPRETATION: AN INTRODUCTION
I. Introduction
The purpose of this memo is to set forth the basic principles of
law regarding both limitations on administrative regulations and the
canons of judicial interpretation most relevant to the department's
proposed program. The discussion is not meant to be exhaustive, but
rather to be indicative of the general attitude of the courts. Of course,
each specific question of statutory authority and interpretation will
turn on its own facts and applicable precedents.
II. Statutory Authority
The general statement of the law is that regulations enacted by
administrative agencies must have a clear statutory foundation. Thus,
in affirming a decision of the U.S. Court of Appeals for the Second Circuit
the U.S. Supreme Court said:
The power of an administrative officer or board to administer
a federal statute and to prescribe rules and regulations to
that end is not the power to make law—for no such power can
be delegated by Congress—but the power to adopt regulations to
carry into effect the will of Congress as expressed by the
statute. A regulation which does not do this, but operates to
create a rule out of harmony with the statute, is a mere nullity.
Manhattan Co. v. Commissioner, 297 US 129, 134 (1936)
Connecticut Law is in accord with the Federal Rule.
No administrative or regulatory body can modify, abridge or
otherwise change the statutory powers under which it acquires
its authority unless the statute specifically grants it that
power. South East Property Owners and Presidents' Association
v. City Plan Commission 156 Conn 587, 592 quoting from State
ex rel Huntington v. McNulty. 151 Conn. 447, 449 (1964).
Similar language was also used in Hartford Electric Light Co. v. Sullivan,
161 Conn. 145, 155 (1971); Finn v. Planning and Zoning Commission, 156
Conn. 540, 546 (1968) (Quoting the Huntington, supra language); Hammenberg
-------
76
v. Holloway. 131 Conn. 616 (1945), State ex rel Baskin v. C.J. Bartlett.
13 C.S. 463 (1945) (quoting the Manhattan Co., supra language); 01es
v. Liquor Commission, 10 CS 489, 492, 493 (1942). See also 30 Op. At. Gen.
135 (March 24, 1958).
It should be noted that the details of a regulation need not be
expressly authorized by the legislature: In John J. McCarthy Co. v.
Alsop, 122 Conn. 288 (1937) the court stated that a regulation by the
Public Utilities Commission must be promulgated "by virtue of express
provisions of law" or must be rules "such as are by fair implication and
intendment incident to and included in authority expressly conferred."
Thus, regulations will be upheld if they are within the implied authority
of a statute as well as within its explicit authority.
In determining what is implied by an act the modern rule in Connecticut
is to examine the purposes for which it was enacted.
It is clear that the Danbury planning commission can exercise
only the powers which are expressly granted to it by statute
or such as are necessary to enable it to discharge the duties
and carry out the objectives and purposes of its creation.
Aunt Hack Ridge Estates, Inc. v. Planning Commission. 160 Conn.
109, 115 (1970).
The broad rule stated above should not, however.be read to mean that
any administrative scheme that furthers the purposes of an act will be
permitted. There must be a rational relationship between administrative
regulations and the statute which they interpet.
/T/n order to determine whether the regulation in question was
within the authority of the Commission to enact, we do not
search for a statutory prohibition against such enactment; rather
we must search for statutory authority for the enactment. Finn v.
Planning and Zoning Commission, 156 Conn, at 545 (196&), quoting from
Avonside, Inc. v. Zoning and Planning Commission, 153 Conn. 232, 236.
To summarize, in assessing administrative regulations, the Connecticut
courts look beyond express statutory authority and will uphold regulations which
further the basic purposes of an act and conform to its general approach.
-------
77
III. Rules of Statutory Interpretation
Ambiguity is liable to exist in any complex statute. The
tendency toward confusion is especially likely in statutes which
attempt a careful balance between parties with conflicting interests.
It is therefore not surprising that the Enforcement Act contains
provisions requiring clarification. What follows is a discussion of
several principles which appear to be the most likely ones to be
invoked in interpreting it.
The primary rule of statutory construction in Connecticut is
the "plain language" doctrine.
Legislative intent is to be found not in what the legisla-
ture meant to say, but in the meaning of what it did say.
Mad River Co. v. Wolcott. 137 Conn. 680, 686, 81 A.2d 119.
The cases in support of this principle are legion.
The major exception to the plain language rule is the "bizarre
result rule." Statutory construction which enables a statute to
become effective and workable is to be preferred over one leading to
an unsupportable and bizarre result.
We must avoid an absurd consequence so as to attain a rational
and sensible result which bears most directly on the object
which the legislative body sought to obtain.
United Aircraft Corp. v. Fusari. 311 A.2d 63, 163 Conn. 401
(1972) p 414.
Where confusion in the meaning of a term is apparent then another
rule of construction may be relied on. Ambiguity in the meaning of a
term will lead the court to review legislative history, the general
approach of the statute and the basic purposes behind its enactment.
A fourth rule of construction is that an interpretation of a
statute by those charged with administering it is entitled to great
-------
78
weight. Swendig v. Washington Water Power Co.. 265 U.S. 322;
Savings Bank of Rockville v. Mil cox. 117 Conn. 188. Furthermore, if
an administrative interpretation has been acted on for a number of
years it will not be disturbed except for very cogent reasons. State
ex rel Bezzini v. Hines. 14 Conn. Supp 246, no error 53 A.2d 99,
133 Conn. 592 (1946).
The primary purpose of the Enforcement Act is to protect the
environment, the public health, the public welfare and the public
safety. Thus,a fifth rule of construction is applicable. Statutes
which are remedial in nature will be given liberal interpretation.
State v. Vachon. 161 A.2n 509, 140 Conn. 478 (1954).
A final rule of construction that might be raised is that penal
statutes will be construed strictly. However, while of superficial
applicability, this rule in fact does not apply to the Enforcement Act.
The reason for construing penal statutes narrowly is to ensure that the
public is provided with a precise definition of forbidden acts.
Grievance Committee of the Bar of New Haven County v. Payne» 22 A-2d 623>
128 Conn. 325 (1941). The Enforcement Act does not define any forbidden
acts; it merely provides an additional remedy for failure to comply with
duties which are spelled out elsewhere. Therefore,the logic behind the
strict construction rule is inapplicable.
IV. Conclusion
The basic principles for determining whether administrative regu-
lations are authorized by statute are liberal in Connecticut. As long as
the regulations 1) do not conflict with clear language of the act,
2) implement the basic purposes of the legislation, and 3) accord with the
general approach set forth in the act, they will be upheld. Furthermore,
where statutory language is ambiguous or where following the letter of a
-------
79
law leads to absurd results, the courts will interpret a statute
broadly and give great weight to an administering agency's
interpretation.
-------
80
COST OF COMPLIANCE AS A BASIS FOR CIVIL ASSESSMENTS
The cost of compliance approach is either clearly author-
ized by or consistent with the various standards set forth in
the statute, and is supported by the legislative history.
(1) The approach follows the express dictate and
plain meaning of the "immediate and continuing
compliance" standard of §2(b) of the Enforcement
Act.
(2) Because the approach promotes compliance with
environmental laws, it is necessarily consistent
with the "external impact standards" of §2(b),
which require the Commissioner to consider impair-
ment to public health, safety and welfare, the
public trust in the state's natural resources and
reasonable (i.e., legal) use of property.
(3) The approach implements the mandate of §2(c) that
the Commissioner consider at least seven factors
in determining individual assessments. Four of
these factors are similar to those articulated in
2(b); the others—the past conduct of a source,
his present readiness to comply and his economic
and financial condition—are covered by those
sections providing the Commissioner with discretion
to include prior violations in the calculus and to
waive or to mitigate the assessment under certain
circumstances.
(4) The cost of compliance approach addresses one of
the primary concerns evinced from the legislative
history; it permits a law-abiding regulatee to
operate on the same economic footing as that of
his dilatory competitor. The penalty schedule and
the formula directly implement this policy.
-------
81
TO: CPEP Staff DATE: November 8, 1974
FROM: Phil Reed
Cost of Compliance as the Basis for Civil Penalties
The civil penalty regulations proposed by the Department are based on the costs
of compliance with air pollution standards. That is, the schedules proposed in
section 22a-6b-6Q2(d) and the assessment process for individual cases proposed in
section 22a-6b-602(e) are designed to enable the Department to eliminate the
economic benefits of delayed compliance by, in effect, taxing them away through
civil penalties. This program is designed to achieve three objectives:
(1) to ensure prompt compliance with environmental standards;
(2) to equalize the economic position of similar sources;
(3) to avoid excessive assessments against sources.
This section addresses the question whether civil penalties based on the costs
of compliance — economic civil penalties — are authorized by and consistent
with section 2 of Public Act 73-665. The question is broken down into five
parts. The first two deal with the relationship of the cost of compliance
approach to section 2(b) of the act and its standards concerning the adoption
of penalty schedules. The third part is a consideration of whether the cost
of compliance approach is consistent with section 2(c) of the act and its
standards for setting penalties in individual cases. The fourth part is an
examination of the impact of the legislative history of the act on the question.
The fifth part is a discussion of the extent to which the proposed regulations
implement the cost of compliance approach. The conclusion of the five part
analysis is that the economic civil penalties are indeed authorized by and
consistent with section 2 of Public Act 73-665.
1. The cost of compliance approach is clearly authorized by the "immediate
and continual compliance" standard of section 2(b) of Public Act 73-665.
Section 2(b) of the act requires in part that in adopting penalty schedules,
the commissioner "consider the amounts, or ranges of amounts, of assessment
necessary to insure immediate and continued compliance...." with relevant
environmental laws.
The regulations include a penalty schedule based on the cost of compliance.
"The maximum monthly amounts set forth in this
schedule represent the economic advantages a
person responsible for an unabated activity could
gain from one month's delay in bringing that act-
ivity into compliance. (They are calculated by
multiplying the cost of compliance times one
twelfth the cost of capital.)" (Sec. 22a-6b-
602(d) (i))
-------
82
This schedule satisfies the "plain meaning" of the statutory provision. The
penalties in the schedule, in effect, tax away the economic gains of non-
compliance. The existence (and effective use) of the penalties will eliminate
the economic incentive to refuse to expend the money necessary to come into
compliance with applicable air emission standards. This should have a sub-
stantial influence on regulatees that are businesses and whose decisions are
based on economic incentives. The proposed schedule thus follows the express
dictate and plain meaning of the "immediate and continued compliance" standard
of section 2(b) of the act.
2. The cost of compliance approach is consistent with the health, safety and
welfare; natural resource protection; and use of property standards of section
2(b) of Public Act 73-665.
Section 2(b) of the act requires that in setting up the penalty schedules, the
Commissioner, in addition to addressing the need for "immediate and continued
compliance," consider
the character and degree of injury or impairment
to, or interference with, (1) public health,
safety and welfare, (2) the public trust in the
air, water, land and other natural resources of
the state, and (3) reasonable use of property
which is caused or is likely to be caused by
the type of activity described in such schedule
or schedules.
These factors might be termed external impact standards.
The external impact standards are less susceptible to a plain meaning construc-
tion than is the immediate and continued compliance standard. The terms "public
health, safety and welfare;" "public trust in the natural resources of the
state;" and "reasonable use of property" have very broad meanings. Neverthe-
less, the civil penalty schedule based on cost of compliance does reflect
consideration of these standards in several ways.
The proposed penalty schedule protects public health, safety and welfare. It
promotes compliance with air pollution standards which themselves are designed
to protect public health, safety and welfare. (See Regulations of Connecticut
Agencies, sec. 19-508-1 through 25, especially sec. 19-508-1(b). See also
CGS sees. 19-505, 19-510). The economic civil penalty schedule also safe-
guards against penalty assessments that would be inordinately greater than the
amounts needed to ensure immediate and continuing compliance and which would
be detrimental to the state's economic welfare.
The penalty schedule in the proposed regulations protects the public trust in
the state's natural resources by encouraging compliance with the state's
environmental standards.
The schedule protects the reasonable use of property. One reasonable use of
property that is jeopardized by continued non-compliance by some companies
-------
83
is the business enterprises of their competitors who do comply. The latter
have assumed capital and operating costs not borne by the former. The cost of a
compliance-based penalty schedule would balance this equation. On a more general
level, the proposed schedule would protect the reasonable use of property by
promoting compliance with air pollution standards which are also designed to
prevent interference with such property use (see Regulations of Connecticut
Agencies, sec. 19-508-l(b) and CGS sees. 19-505, 19-510).
Finally, the penalty schedule also takes all the external impact factors into
account when viewed in conjunction with the provisions for setting penalties
in individual cases. The schedule sets out maximum penalties as opposed to
fixed amounts. Penalties assessed in individual cases can be lower than those
in the schedule on the basis of the external impact standards. Section 22a-
6b-602(e) specifically provides that penalties in individual cases may be set
below the cost of compliance figure after consideration of relevant factors,
including those relating to public health, safety and welfare; natural resources
and property use spelled out in section 2(b) of the act. The penalties actually
levied can (and doubtless will) vary according to the impact of the activity
penalized on the public health, safety and welfare; the natural resources of
the state and the reasonable use of property.
Thus, the use of cost of compliance as the basis for the penalties in the
schedule in section 22a-6b-602(d) of the regulations conforms to the require-
ments of section 2(b) of the act.
3. The cost of compliance approach as applied in the regulations is consistent
with the requirements of section 2(c) of the Public Act 73-665.
Section 2(c) of the act requires that in setting penalties in individual cases
the Commissioner consider "all factors which he deems relevant, including but
not limited to" seven specific factors:
(1) The amount of assessment necessary to insure immediate
and continued compliance;
(2) The character and degree of impact of the violation
on the natural resources of the state, especially any
rare or unique natural phenomena;
(3) The conduct of the person incurring the civil penalty
in taking all feasible steps or procedures necessary
or appropriate to comply or to correct the violation;
(4) Any prior violations by such person of statutes, reg-
ulations, orders or permits administered, adopted or
issued by the commissioner;
(5) The economic and financial conditions of such person;
(6) The character and degree of injury to, or interference
with, public health, safety or welfare which is caused
or threatened to be caused by such violation;
-------
84
(7) The character and degree of injury to, or interference with
reasonable use of property which is caused or threatened
to be caused by such violation.
Four of these standards [(1),(2),(6) ,and (7)]cover the same ground as
the standards of § 2(b) of the act. The other three are what might be
called regulatee conduct and condition standards.
The procedures in the regulations [§ 22a-6b-602(e)] for setting penalties
in individual cases ensure the consideration of all of these issues. As
has been noted, a penalty based on the individual regulatee's cost of
compliance is first calculated. This is responsive to the issue of en-
suring immediate and continued compliance [§ 2(c)(l)]. For the reasons
set out in pp. 2-3, above, it is also somewhat responsive to the external
impact standards. [§ 2(c) (2), (6), and (7)]. The initial figure can
then be lowered on the basis of consideration of the second through
seventh factors set out in § 2(c). The regulations require the
commissioner to consider these questions. They provide that the
regulatee be given an opportunity to raise them at a hearing [§ 22a-
6b-602(f)]. Thus there is general provision for taking all these
factors into account in the setting of individual penalties.
In addition, specific provisions of the regulations establish special
procedures for consideration of several of these factors. Section 22a-
6b-602(b) provides for the inclusion in the period for which the penalty
is assessed of certain periods prior to discovery of the violation.
This enables the commissioner to take into account "prior violations"
of the regulatee [Section 2(c)(4) Public Act 73-665] and the conduct
of the regulatee in "taking all feasible steps... to comply" [Sec. 2(c)
(3)]. Regulatees who have taken all feasible steps and who do not have
a history of violation are given further consideration under the
provision of Section 22a-6b-602(g)(4). That section provides for
waiver of the penalty where the regulatee has taken "prompt and
effective action" to bring an unabated activity into continuing
compliance with applicable emission standards after receipt of a
warning letter. This provision does not apply to regulatees who have
ignored past notices of non-compliance [Sec. 22a-6b-602(g)(4)]. In
addition, Section 22a-6b-602(g)(4) excludes from the period for which
the penalty will be assessed "periods of non-compliance that were
caused by extraordinary factors beyond the regulatee's control." This
also will result in specific consideration of the diligence of the
regulatee in coming into compliance and thus further satisfies the
requirements of Section 2(c)(3) of the act.
-------
85
In conclusion, the statutory standards for setting penalties in individual
cases [Sec. (c)] are all taken into account in the approach set out in
the regulations.
4. The legislative history of Public Act 73-665 supports a cost of compliance
approach for civil penalties.
The use of cost of compliance as the basis for penalties listed in the penalty
schedule and assessed in individual cases is directly responsive to one of the
major concerns of the supporters of Public Act 73-665 in the Connecticut
General Assembly. In the debates in both the Senate and the House, the
legislation's proponents emphasized that it was intended to eliminate the
economic incentives for non-compliance and the competitive disadvantage that
could result from voluntary compliance. In the House debate (Wednesday, May 23,
1973), this point was made by three Representatives:
Representative Richard H. Wagner stated:
"Presently the procedures existent (sic) and available to the
Commissioner are unfair to most companies. What I mean by this,
Mr. Speaker, is that basically it can be a company that may comply
with an order to abate pollution by making a capital expenditure,
where another company may not, save the capital expenditure and
tie up the matter in the courts. This gets to the heart of the
problem, Mr. Speaker." (H-145, Connecticut General Assembly,
House, Proceedings 1973, Vol. 16 Part 15, p. 7781)
Representative Bernard L. Avcollie made the following statement:
"Now, are we going to sit here and say that we've got a myriad
of sections on the statutes which can't be enforced...literally
can't be enforced? Are we going to say that we will permit
large industry, municipalities and individuals to evade the law
in the courts because it's cheaper to evade the law than it is
to clean up the pollution? I don't believe we should do this."
(H-145, Connecticut General Assembly, House Proceedings ]973,
Vol. 16 Part 15, pp. 7794-95)
Representative Gerald F. Stevens observed:
"Presently, the only thing the Commissioner can do when a
violator ignores the Commissioner's order is to refer it to
the office of the Attorney General, and no matter how ex-
peditious the Attorney General wants to be, there is no
question but that attornies (sic) can tie him up in court
for long periods of time, and, quite frankly, it's cheaper
for many firms to continue to pollute, to pay the attornies1
(sic) fees, write the attornies1 fees off, than it would be
to comply with the commissioner's
-------
86
order." (H-145, Connecticut General Assembly, House, Proceedings
1973, Vol. 16 Part 15, p. 7796-97)
In the Senate debate on Tuesday, May 15, 1973, Senator Gunther had the follow-
ing to say:
"We are not trying to put people out of business but we do
want to protect the businessman who is honestly complying.
Some businesses spend millions of dollars bringing their
air pollution systems into compliance with our law and a
competitor down the street saves that money by hiring some
legal expertise in delaying the matter in the courts for
years." (S-97, Connecticut General Assembly, Senate, Pro-
ceedings 1974, Vol. 16 Part 8, p. 3549)
The General Assembly clearly expected that the legislation it passed would
eliminate the economic advantage of non-compliance with the State's environ-
mental laws.* The penalties based on cost of compliance address this object-
ive in an absolutely straightforward and completely effective manner. Thus,
the legislative intent definitely embraces the penalty scheme of the proposed
regulations.
5. The penalty schedule and formula included in the proposed regulations
implement the cost of compliance approach.
The cost of compliance concept introduced in the regulations includes all
elements that affect the real costs a regulatee faces in complying with
applicable environmental standards. It takes into account equipment, in-
stallation, operating and replacement costs. These costs are discounted at
an appropriate rate. Taxes, inflation, and depreciation are also factored
into the formula. (see sec. 22a-6b-602(b)(5).) The penalty schedule and
initial individual penalties are based on this sophisticated cost of compliance
formula. In dealing with individual cases, the proposed regulations apply
the penalty to all appropriate portions of the period from the point at which
a regulatee is responsible for compliance with environmental standards to
the point at which compliance is achieved. The "assessment period" over
which the penalty is assessed includes the entire period during which a reg-
ulatee fails to make the expenditures necessary for immediate and continuing
compliance with applicable emission standards, except for time during which
it is in compliance with a final abatement order. (Sec. 22a-6b-602(b)(1)).
There is provision for limited inclusion of the period of delay between the
date a regulatee is responsible for compliance and the date non-compliance
is discovered. (Sec. 22a-6b-602(h)). Portions of this period of delayed
* None of those who spoke against the bill in either chamber expressed
any opposition to this facet of it.
-------
87
compliance that are due to factors beyond the regulatee's control are, in
effect, not counted in this period. (Sec. 22a-6b-602(g)(3)) Regulatees
that take "prompt and effective action" to come into compliance after dis-
covery by the department that they are in violation benefit from a waiver of
penalties. (Sec. 22a-6b-602(g)(4)) This may be viewed as a dilution of the
economic rationality of the penalty scheme, but applies only in cases where
the desired goal — compliance with emission standards — is achieved with
all reasonable speed.
The assessment period established by the regulations removes the incentive
for regulatees to delay coming into compliance in almost all cases. All
delays for which the regulatee is responsible that occur after receipt of the
warning letter are penalized. Delays prior to the receipt of the warning
letter are penalized if the regulatee has been an enforcement problem in
the past or if it does not move with reasonable dispatch toward compliance
after receipt of a warning letter.
The penalty procedures set up in the regulations provide an effective mech-
anism for ensuring that penalties unreasonably greater than the cost of com-
pliance are not assessed. The commissioner is empowered to obtain cost in-
formation from the regulatee to aid him in making an accurate cost calcula-
tion. (Sec. 22a-6b-602(i)). The commissioner has the option of delaying
issuance of a notice of violation, deferring issuance of a final order after
a hearing, or delaying collection of a penalty for a reasonable time if
sufficient information for a reasonably accurate calculation is not available
(Sees. 22a-6b-602(f), (g) (4)*.) Finally, the regulations include ample
provision for mitigation of penalties that exceed actual costs. (Sees. 22a-
6b-602(g)(1), (2)).
It should be noted that the regulations do provide for the assessment of
penalties lower than those based on the cost of compliance. (See sec. 22a-
6b-602(e) and the discussion under II.B.3., supra.) This will be the case,
however, only where the statutory goal of immediate and continued compliance
is achieved (Sec. 22a-6b-602(g)(4)) or where the external impact of the
activities penalized warrants a lesser penalty. (Sec. 22a-6b-602 (e)) . ,, see
the discussion under II.B.2 and 3 supra.) Thus, the proposed regulations do
effectively implement the cost of compliance approach.
* The regulations do not specifically call for delay of issuance of a notice
of violation under sec. 22a-6b-10(a). However, the provision in sec. 22a-6b-
602(g)(4) for issuance of a warning letter on discovery of a violation does
appear to give him some leeway in this area. See the discussion under II.E.
I. below.
-------
88
COST OF CAPITAL
"Cost of capital" is examined in the context of utility rate
cases and a single antitrust case.
Supreme Court rate cases have been read as holding that three
criteria must be taken into account in computing a fair rate of
return: (1) the credit maintenance standard, (2) the comparable
risk standard and (3) the capital attraction (cost of equity)
standard. The Department's cost of capital method employs all
three standards.
The elasticity of acceptable methodology is apparent from
federal and other state decisions. An "ideal" capital structure,
rather than one based on the recent past, may be posited by the
regulatory agency. The equity portion, in particular, may be
derived from potential earnings-price ratios, dividend yields or
any variation thereof.
In Connecticut, any "reasonable" method will suffice. More-
over, even if the chosen method has patent infirmities, it will
be acceptable so long as the overall result is considered reas-
onable.
Cost of capital was excluded from damage calculations in
one federal antitrust case. The method was held not generally
acceptable to economists and insufficiently related to actual
costs. The precedential value of the case is weakened, however,
on two counts: (1) The court determined that the purchase in
question would have been financed exclusively by debt (thereby
making a cost of capital determination of its own, albeit at
the lowest parameter); and (2) The Supreme Court affirmed on
different grounds and the reasoning of that opinion has not
been followed since.
-------
SUGGESTION COMMITTEE SAY: Improve Your Own Condition; Earn Cash and RacoaniHoni Send InoSuggestionl
Interdeparffment Message
STO-201 REV.3/74 STATE OF CONNECTICUT
(Stock No. 6938-051-01)
89
SAVE TIME: Handwritten messages are acceptable.
Use carbon if yon really need » copy. If typewritten, ignore feint lines.
To
horn
NAME
Bill Dr avion
AGENCY
CPEP
NAME
Fred Dennehy
AGENCY
TITLE
ADDRESS
TITLE
DATE
Feb. A, 1975
TELEPHONE
ADDRESS
Cost of Capital
Utilities: Federal C
Thf> "coR4" of capital" method of arriving at- a fair return on investmen
in a public utility has received the implicit sanction of th« Supreme Cou-'t
on p^wpral occasion?. In Blupfiel.J Waterworks and Tmorovprnpnt Company _ v._
Public S^VJCP Commission of We^t Virginia, 262 U.S. 679 (1923), the Cour4-
d that;
return should
>->-o reasonably sufficient to assure confidence
in *("><= SOUPIT>CS ot *np utility, an"! sboul 4 br adoquaj'^, ':n:°r effl—
ci°nt and pconomical manaT^mnn"1: to maintain ?rd sucoo^t ^^^ ~o"^Dany' °
crpdi4: and rnable it to raise the mon«v ne°pcsarv for the proper -:ic-
chargp of its publi<~ iuties." 262 U.S., at. A93.
? v, in Ff^prsl
/^r Comri"f:iQr ••?. Hone Matural Ga^ Corrnn
320 U.S. 591 (194^), MT. Justice Douglas, speaking for the Court, 'la'-'O's4-^-'
on th
"From the investor ox company point of "ie^ it is important
rp be onour11 r°"«nuo no4" onlv for operating pxo^nses, Nj* also for
o^t? o
busine
01
and JiviJends on the ctock. 3v that standard the return to +bo equitv
owner should br, suffi^iTt to as^ur^ cor.*i d^T-'- in th° financial int<=-
"rity o^ the onteroris^, so as to maintain credit" and attrar^ -aoi^al.
The conditions under which more or less ni^rt b- allowed ar^ nox im-
portan-f- h^-^." ">20 U.S., at ^0^.
TKogA standards havp hpen construed to include three criteria: (a) the
maintpnance stanJard, (b) the comoarablp risk standard, an.-i ('•) thp
l attraction standard, also known as "rost of capital.*1 Frp-! p. ?,forr!cc"
"A Reconsideration of Cost, of Capital and a Res^nable Rate of Return," 3]
Jour, of Land "conomics, 229 - 7^.
More ro^^ntly, in the Pprmian Basin Area Pat<= C-asos, -^90 U.S. 747 (1969),
^hp Court apo-oved +hp Fedpral Pover Commission's us« of the "comparable risk"
m«>tho-J, but statpd that "other standards might properly have bpen emoloyod."
390 U.S., at 80^. Footnote R3 of thp opinion, expanding on the abo^o, refers
to J. C. Bonbright's Principlps of Public Utility Rates, pp. 240 - 283, in
which "cost of capital" is held to be the "basic standard of a fair rate of
return." ^onbright, at 240.
SAVE TIME: // convenient, bandwrite reply to sender on this same sheet.
-------
Drayton
F-h. 4, 1975
Since long-term debt ^Ost assessment *s an integral pa^t of cost of capital,
a proper application of th° method vnll necessarily include consideration of
crMit maintenance. So lonn as returns *or comparable business undertakings
ar-'1 wei^he-! in the equity portion of th° computation, the method is an acc
r^nasu1"" of a rair rate of r^tu^n hv anv reading of the Court's standards.
-Jpral Court or Appeals '-asps -*-epd to echo the general language of the
Court, aril stress •'•he "Ki"O3~< power" of the reculatorv authorities to
pvidopr= on which to re]v. Southern Louisiana Rate Cases v. Federal
v-"- Commission, 42P F.2d 407 (1970); Powell v. Washinn+on Metropolitan Ar°a
Transit Cvs-'-em, '"-P5 F.2d 10PO (1973). One of the few restrictions upon the de-
t^'nination o* fair return an^ reasonable dividend r^t^s is to be foun> in
",'i 1 Ham? v. Washington Metropolitan Area Transit Commission, 415 p.?d 92P (19'^
for *^o Cour*, de^lar^jj
n^ a fai" return on a r
'i^'i J^p J vi^l-1 vihict-i look? ^ol^l'1' to a r^^^in"1 o* ^h^ market
nri^- or ^h^- ^onnaiv' s -.tock at part l^velf is manifest] •/
unacreptablP." 41^ F.?J, at 970.
ron 'i^ion^, t>pr. , muct be look^H xo in xh° ^^t^rmination of '•oct or
al^ho'j^h PO ra-J-i-.ulaTi ^al'u]ue or no-*r- of '•"Iec
s of *he "ro?t
of c^at^ ^acps cnnrTning oubli" utilifvr ra*es. In
PTjbl i - n+il itipc Comnission, 1 2A A.?d 777 ( 19^) , -^he P^n
aid •Lh=?i- ir J-'^^ -'^•'-^rmination os "os'' or capital the "best
«> in t-^rns of an
A.?d, a+ 7^1. In
Wat^r Company •>•. Pennsylvania PuKli" Utility Conrniscjon, 1 (/10 A.
p~]/, " (]o-qj5 fhn came court said ^ba4- a nroD<~r -io-l-ormiration
'"-b^ rinan'-ial st^uc-hurp of ^h^ utili^v, cr<^it standing, -iividen^s, ir^e^oc
a-UJ-on-'ant risks, r^'-ulatorv la", wasting a^s^tc, and anv npculiar fea^ur^^ o
•"•"-p utility involved." 1^0 A.?i, at l?l. In rc-snbnse to ^be govprnmec4-' ? ^o
^ontion •'•hat the historical cos^ of Capital '/vac i-nor«^ the ^ourt r
pr-e,n+ oast] alon^ i« no4- -on^rol ling." l^O A.2^, at. 122.
A4- leas4- three s^epc are necessary to arrive at the cost of capitals
(l) -|rt.ormir>a4"ion of capital structure, (2) assessment of cost of debt, and
pt of cos4- of equity. The accepted capital structure (ra+io o*
fo equi^v) mav bo at variance both *rom •'"be pr^s^nt and the recopt pas4:.
Tgjl'-ol i ^a + "d Water Company, supra. Most courts ho.! ^ *hat calcula-
4To"ns mav h^~h?Tse-} on an "i^al" ^aoital struc+uro, on<= as it "shoul-1 br"
in opinion or •'"he ^n"i;latorv authoritv. "irw Fngland Tel, an ; Te] . "o.
i7-^-, <57 A.?-i 21^, 220 c C-e^ also K'eyj Fn^land Tel, and Tel. T
o f Pub lie Uti I i tjp ? (Ma^s.1, 121 N.F. 2-' 89^. As a rul», +he onlv
Iimi4-a4-ion upon a hvoothetical Capita] structure doj--rmina4-ion i<= ^ba4- i4-
." 97 A. 2', at 220, su pr ? .
-------
3
~i
O
.•>
•
\i
Ci.
— 1
o
1 — '
.
1 — '
vO
~"J
' — •
- — •*
••
''J
•*..
1 * J
|~3
I ^
,M
i •*
i-
;
I \
i D
' JJ
• ,"3
i
; 1
ij-.
j >
1
i i *~
1
S )
;o
">
*•
"•O
i — •
3
.3
J
•
VN
.0
ro
*
•sJ
o
n
^>
*
'O
. L.
*
vl)
f-
'13 t- r 3 TJ *-•• r
> --• r < > T 3 .T
- J 3 U -• ) 3
3 Z D J •» -!
•t T 3 3 3 - 3 )
D ... 3 ' 3 1> 0
1- (- D ) 3
t- T ,T ,0 T> 3
a 3 3 ~" 3 « D
O - 3 - 11 3
.? . i > ••- 3 <
3 3 3 - i 3 ;-t -
H D 3 •> »- — • - .3
0 ) 3 ~" -• -
"n
•
^
3
3
oi
r — 1
0
3
. -j
3
-
3
3
rj
i ^
3
'(
3
3
3
i
~C
d
T
h— '
1_1.
~"
, fc
H*
:— •
H*
, f
t-j.
3
/i
)
0
~3
3
n
•n
!~ '•
3
3
*
IT— • 1-1 *- 3 30)
o o 3 c: .A. Q a
3 1- <: •< -t- 3
3 r 3 3 D -t- D> 3
-->• 11 ^ C 3 D D
-•• .3 3 t
1 — • r » n -* r
• 1- C i 3D
>-"• i — • "i D O
C 3 f> i) 1 3 <- )
3D • • + 3 7> 3
3^)3 H« — j „ 3
3 O 3 <-•• 3
i 3 3 ) h H-
" ' 3 -r -r S D 3- 0
D 3 '< O -3- Ol 0
t- h 3 ••* -h f-" -1- H-
d 1> >-• 3 O t) i
^ .j. , — t o ^ 33
D 3 ~" *. ,-t- 3 -
— ' .3 -3 »• o 3 in
~", ) 1 -T
, ) -3 • •• D -» ii a.
i) n 3J U (0
D -" 3 . •) 3 + 0
j « ,_u o T i-1' H'
") 3 • -1 h 3 0) />
3 >-•• r 3 3 t, M«
• *- 3 ^J* *-*• .11 01 O
•• •" Ji 3 i ) 3
> h 33*-
O o 0) f- i-j« • 3 li.
'O > rr 3 •< H«
O -" c 5 3 3 -4 in
0 -DO)
^ +• M n 3 ^ —
« 3 'T 3 •* •> — •
C.T 3 0> .3 j" h 3
• 1- -t- C 11 D -1' .?
t-- 3 3 (••••
1 t- + h ,- 3 -• .3
-O r IT oi -r j
I—" 3 9 -1 H- .i. r-"
* 3 30330}
3D • 3
-N - '• 3 > 3 3 -O
O 3 +• T 3 30
--333-5 f -> ' <
« 3 3 .-'. • ^
< -. * 3 -T < H
• *- T 3 J 0)
3 J 3 3 O 01 *•
~1 3 O ^ 300
-+ 1 H 3 3 O
• ... C 3
•^ 1
+
* - 3 M- ) ) O > )
c i- « ^ J TJ J -• -" 3
>-" 3 -r ; 3 3 -• a> a
1 — * }> —*• 3 ^-3
>-" 1 0) •*> -H 3 E> ~" ^J-
•f 3 — • -1 0) •) 3 «3.0
^J" 3 ' — ' O -* -T t- v3 3 .0
3 01 3 3 3^) — '• t, -j.
;i r S 3 - .u 0
— n :: 3 ) C J 3
O 3 -33 t- 0) .^. -
3 - . . 0 +• 3 4- 3
3 < • T 3 ") r+
3 !->• 3 33 11 > O j.
>->• 3 01 '/3 .*. 3 ,T O 0
3 -*• d t-D JH3
IJ3 ,3 3 H- P-" 0 * 0 H-
3 3 r-" D C ,7: M-
3 3 ,.3 3 0 . f ,3 O
" i-" .3 D 3 ') 3
n H 1-3
J ~" 0 . ) h O r -h
O > )- O -" C 33
Jl M- 3 3 -i
-•• O S 3. H- ID
j-> 3 3 t- ,t f" i
• .) D * >
%J f- + _c. i. 33
... D 3 D h O '3
3 3 QJ D *"
VO ) J* f-J* H« 3 3
^ T -I- n •< O -4 Z
o T .3 -"• +• :3
3 < .S .Q
-— • i '3 1) 3 "DC
•— • j n +• .D M- D
xD t-H i • 3 "V l .-•
-J 3 C D .T i-"
\5 i — • D 3 "i" *tj
— ' -* JJ h ft H*
•*
(-
T
^
^}
O
C^
^
*•
o
^
c )
0
3
3
O
^3
T)
t — '
*)
01
/)
J.
*)
J
*J»
•> + 3 a D o
t? O '< M 3 +• -i.
'^ D -3 3 h~-
iT ^ -J) C !-, — •
•-; .r 3 -i H" --•.*•
T 3 3 .3 3 JT
3 •- D • (-3
-" T < 3
;£ 5 --• ) 3
"J /I 3 "1 "+j '4-3
-t- 3 t. -> •< 3
5 '-•• < 3 O
I 3 3 H- 3 3D
3 .0 3 ... 3
O o" T D ,J- -
3 rl- O _T 0
O '3 0. O f >
D ~i •* ^ O O 'f
3 3 3 n O
< M- 0) -J + -+• O
330 ^T ?^
< *-"• i. H 9 i
• 3 *• 33
".j :") = 33
'd 3 -< 3 < 71
C ? 3 3 3 3 t-
•T T 3 D r> 3
— • D 3 .1 f M- ..
-" -h 3 3 0) i)
1 *- 13 O h 3
T (-" .J' 1 n T ^
< ^. O 1 . . 3
• 1
3
1
t-
O
3
• O
^
y*
^^
j
r
D
3
^-r
OJ*
_-(-
0
H
^
3
i
•j
«
O
_<
£3.
•
-o
IN
O
'\3
* — >.
! — '
vO
y>
n
— *
•*
t-
3
"3
g
4
^.
o
^
•5
•-<
H
^
l— '
03
. f-
ZT
73
*- J- O 3 3 0 v-l Tl' ,3 3
;3 ' i
3 • 3
3 3
'O .3D
T D 3
3 ( 3D
0 -t- ->•
33 3
3 t- r ^ D f -)
<- :T u t- i— • 3 r ><
•-•• ^ 3 T ~j ._ 3 a
•i +• 3 3 3
t-1- v-" .. -j> t- 13 i
-^ 01 ." 3 -O 3 -< D t-
r-"« — • OH -~ "3 3 "" "•)
3 < 3 -t- Ol .-t- 'r
• D i -4» ~""C ^.
) >- 3 f -J 3 3
3 t-" TO rJ' . ) h 3
of- ) f O ;3 'T a)
t- 7) 'O 3 3 73 3
to -f - \) '/> 3
3 T 3 . OH" Jl
t^ — '• *-h i '3 ' ^ 3
T : 3 ' 3 +•
— 33 3 1 j i r
--•• j f j i !jj j
3 ") * ^ '.r
- 3 < ',£-•• 3
t- -i« u "jr o H
•-" 7) M C .3 tj- 3
1 — ' o 3 H H« — • n
- J* Zt : — ' J» D 3 11 D
f. M. 3 /) •• ' i
3 'J D i-»';^ T <
3 ' t- t-
) O H-
3 j3 -n O
3 + D 3
! 3 ./>
•> rT o
>••• 3 ;3 T
.3 ^ • D
3 3
ti 3 i ct- O + 3 "•'-•• T» H
c 3 -T n : s 3 ^ <
) — ' •( D D 3 O O U -"
01 .. f ) ,0 ji •< >-• i- t> .3
3 331- -J -•• 3 >
-" r 31- 3 3 3 t- 3 • c"
3330
>-'• ^. "3
1-0 <
3 D -" 3
3 u
{ "1 *-*•
-J 3
',3
T 1
J- 3
3 -1
_j (~i
*-*• ~)
3
> " (
, f- 3 -t r 3 -i < .r j> 3 "3 u
i> 7J D D '•-'• •* ™> • >* ( | 01 D * t-
:— ' Oi OH H D NJ v^ f— ' 3 -••
-<. D ') 01 -h T) - <. r" 3 - O
.. -x. .3 -r T) a) ,l
73 D +• >-"• i— • „ l-i ) sO
ft- ii. T n 3 3 !-•
3 -i. •' >->• 3 -J
H h .3 -i i-" 3 -h
3D" 3 a 0 * 1 -~~
H. D 0 3 T /> 3
3 t- A) -313 3
D )-• 3 u H 3 3 J
, t- ~> -~] D i oi ' i •> r\
—"• O i r-1' — '• H» ' ^ — '
O 3 > (--•• 7> 3 3 - -
3 O " co t-1* "D
• D J 3,1-—'
•< • 0 ,^- -a '-> i
i-H i r •»• 3 *• t-
"J T D 3 7J- O ^-- . J 3
O •(- C 3 O 1
,r> O s— ' co 3 0 3
O A" O D u. O » ;: 0
3 \3 " 33 •-*• 3
t— * T) r\^ . j, -j- ^
H- 3 H- '—' 3 M« •)
3 +• t- a> Q -4 M. -1
D H •• 1 r: H- 3 'D
1- H- 3 -" .1. i— •
H- .0 M (- D 3
O j3 D •-•• < 3 D '3
3 J) •*- < H
3 3 ,V 3 3 -••
*. < f • 3 H- 3 n
1- 3 H» D . 1 i
* * n T> r — ' n -J-
^f 3 H D ^ D
— .3 •-' 3
3 3
S N3 0
D - .+•
™! J
-J 3
•n o ..
1J X>
.•; • H"
, t- n
O
3 • -1 T
"T ^
. -) 3 *•
3 -+•
3 O T)
' O Jl 7)
rr rt- u3
H" 3
a '•< J-
D
: -3 *
« 0 M'
3 !+•
•;-) + 3-
3 .i. -3
330
:o 3
.-" 3
• < ' t-
> :T
'< O
t- ...
3
3 -••
_3
, ^
3 3
.3 -1
j» 3
3 -h
'-1 3
.^« i ^
i. . v^
-J D
r t- _i.
.j. "-*•
3
-=7
D '"*
f- 3
3 :^
j ul*
O T 3 •• 3
3 s^-j» ;_,•) w*
:» ,3 '-'•in D
"> H- ^ C .3
DOT
^-•3-1
3 cu
• <
D D
r -3 h . 3
O >-"
13 'J *• •• 33
1 n 13
^ ' — '
^
Sr ."
•y
"C '',
D 0
3
•3 3
r
-J- 3
i O
3 3
* 3
-' - *•
) ~)
5
1
-1 3
J L,l
) t-
~*
U 3
.J -h
^
D
1 Q
3 .:
._j i~j*
-d
a
0
:_*.
3
,1
j
o
•
---^
*
r1
o
c
i-i*
• )
fjt
3>
3
D
•n
£
r
-i
H-
^
.'0
3
H
• ^
M-
,3
"7>
. 1
O
3
3
UJ*
'0
'1
|_J"
0
"J
* »- >»
D • i— '
3 .3
0
• i r co
33 0
*
-*• \)
i ^ - —
• ^J»
TS
•r * -> n
) O \)
"2 ii- **
C '-^ 'T^
at M« ^
10 O
-J •-• •
-r
^
f ^ *n : a
O J" 0 -*•
D T >— •
*-•( • — 1
-J -)
2. n H N u
D i ) a>
• ) 3 H-" '<
333 vO +
*• 3 ~J O
3 .3 Tl 3
. t- 3
'O o 3
D
.3 >-"• .j.
i. .3 ')
— '• T
3 j -t-
) 3
3 ')
-J- 3 D
7) 1 3
-»•>-•*•
« I — ' ii
*C L~J
)-
.T 3 w.
t) O 'J)
3
T r~t- A"
i-" H 3
n O O
'-i* ' — ' >
O >-• .3 10
H M. ~
H- 3 • h "^
3 .) D
O) •• )
>— ' h
•r 3
) C 1
3 H-
'0 Ol
1 1- ^» 3
3- a.
3 D
O) H M.
*4 73 J)
J- H« vO
o ,-f- d>
3
d ?? 13
01 0 H
T) C 01
vj. 1— ' •— '
« .X I—1
-<^
^r
c: T> 3
3 O
H- 3 rh
•1- H"
D 3 -L
_~^ T"j H *•
H '0
n c a
oj .. c:
J) 3 •»•
3 13
t- ..
3 •
-------
Bill ^ravton 92
Fe1-. 4,
In Noro^on Water Company v. Public Utilities Commission, 2^ Conn. Sup.
(19^), the Superior Court aporoveol the Commission's rate authorization
ch admitted1'/ entaileJ a sharp reduction on equity return. Judge Devlin
aj.l briefly that "sufficient facts wer» incorporated to negative any claim
that the Dresr-ribrH rates were con-Piscatory." 2^ Conn. Dtio. ^l, at.
IA rh.oul ! ^^ noted that in all of the a^ove cac-oc determination of cost
^f --anital is a liminal st°o in the determination of a fair rate of return
for ^he u*ilitv in ouec-*-ion. Thus a"*ua] ~ost IP '"onn+antly moHi^i^ ; hy ?i-
Irn-1 "opt. Hoi^o^er, °^en "i^t^Tnina+ion of actual ro?t - ^rp^cially for equity
- invo^'e^ e°1 ertion from ronflirtino -la^a anH internr^'' a-'-ion, ?nd in thi =
v-pcpr'-t- *Hp tradition of Hef^r^n^o -"-o a^en.^y iudgem^nt is ^ncouraoing.
7"ho ".n^i^ru r"4" Analogue
In "anover ^hoo, Inc. v. Unit^-j Sho^ Machinery Corporation. 2^ F.Surp.
2c P (l0'--), an antitruci ^ase, COP* o£ Capital was ro^e'-t^d as a proper fl<-«-
-^n^- or Janip'^ -alenlation. I'm'4:"'; was guilty o* antitrust vio^tion, anH
1 HO ^^o'lr14" '^o K^ trnV>l°'~! vjas epcoptial Iv the diffpron-~n in coct hetwepn l^as-
i", •; ar-'.' nu^.^haFin" -^rtain ma^hin^c. United attempted to inflate the purchas-
in- '•o^t (and thus lowe^ the differ^nre) hy including cost of capital, but,
thp ~'ictrict Court, concluded that rost of Capital "is not an item of cost or
sn tha+ would Jirertl" afc°c1 Hanover's profitc and losses in any year."
. Supr., ax 29?.
0^ annual, ">77 F c? '• 11( , "i^^'ji*- Tud^" Fr^o iman, sopaking for the Third
h.0 no"«"l eon^-^D^ whi'-h United <^ough4' to have approved has
^h^d *ho noin+ of "^n^ral acroo* an~« ov^n amon" e>-~ono
mic'tc;. Wo aTen u/ith th° ^ou~-t h<=.low tha* <~ost of capital ic no"1
f--urf 1 °i rn^l" Tpla-*--J +o actual rost.c *o ^^ inclu ip-i in an an^i-
o '-al "ui at i or." ^77 7.2!, a+ 7Q2.
Tho U.S. Supremo COUT+ a"rirm"i on this point, not because the cost
o* <• animal m«tuod was r.e^-e<-Cqii ] ^Ic0 ^ound that Hanov^^ woul ' hav« funded the pur^ha^e entirely through
lo»- interest dr^t.
» [7HP -our^ f onn ', *hat] had Hano^.'er bought tue ma"hinpc ix
v/ou 1 "* hairrx o^^ain^d tKo po-o^carv raoital bv ^orroviini at abou*
fhrr"-co-^ '» iu-4"0 ! an in4-.°'-^^J-
To rnv knoi'j] ed-^e, +h" "^istri"-1 Coui-J-'^ d^^i^ion '•on^^'ning "ost o-f ^aoital
o'.'^' ">o~ oprjoc"d in ^ur'
-------
93
JUDICIAL REVIEW OF FORMULAE
The standards of judicial review for the civil assessment
formula are yet to be determined, but case law from analogous
areas suggests probable patterns.
Cases involving the capitalization method of establishing
property values for tax purposes are virtually uniform in holding
that the challenger holds the burden of proving that a tax board's
method of capitalization was unre.-asonable. However, if the stat-
ute in question enumerates several factors to be considered in
making a determination, it must be clear from the record that all
factors have indeed been considered.
In rent control cases, schedules which had been adopted by
the commission correllating income rates or repair costs with
various classes of buildings were approved by the courts even
though the schedules were not mentioned in the enabling legisla-
tion. Again, all factors listed specifically in the statute
had to be officially considered, but the schedules themselves
would not be rejected unless found to be without rational basis
or arbitrary and capricious. Cases dealing with minimum wages,
public utilities and environmental regulation reach similar
results.
With regard to the civil assessment formula, the case law
suggests:
(1) That a challenger must demonstrate that an
assessment determined by the formula is a sub-
stantial overvaluation of the cost of compliance;
(2) That while special allegiance is owed to no single
factor and additional factors may be considered,
every specifically enumerated factor must be dealt
with individually;
(3) That schedules will be acceptable provided that
opportunity is afforded the source to demonstrate
special circumstances mandating deviation from
the formula.
-------
SUGGESTION COMMITTEE SAY; Improve Your Own Condition; Eom Coih ond Recognition; Send in a Suggettionl
___94
Interdeparfment Message
STO-201 REV.3/74 STATE OF CONNECTICUT
(Stock No. 6938-051-01)
SAVE TIME: Handwritten mtssagti art acceptable.
Vie carbon if you really need a copy. If typewritten, ignore faint lines.
To
FfOM
NAME
CEP Staff
AGENCY
NAME
Doug Smith
AGENCY
TITLE
DATE
ADDRESS
TITLE
TELEPHONE
ADDRESS
SUBJECT
JUDICIAL REVIEW OF FORMULAE
This memo examines patterns of judicial review in the
context of administrative law areas that embody any of the
following elements: (a) remedial statutes; (b) statutes
listing factors to be included in the administrator's de-
cision; and (c) economic calculations (e.g., cost of capital).
I. Tax Assessment; Tax assessors (and courts) agree that the
best method of valuation is to look for "good faith" sales of
comparable pieces of property. However, if such comparable
sales do not exist, most tax assessors fall back on some variant
of a capitalization method to establish property values. C.G.S.
§12-62 provides tnat assessors shall revalue property every ten
years, but the statute fails to mention any specific factors
required to be part of the assessor's calculus. The Connecticut
Supreme Court, however, has given its sanction to the use of
capitalization in the absence of comparable sales. Burritt
Mutual Savings Bank of New Britain v. City of New Britain,154
A. 2d 608 ( 1959) . The court recognized that a number of factors w<
involved in capitalization so that "mathematical accuracy is not
necessarily achieved in their use," and established two guide-
lines for judicial review:
(1) Capitalization results should be closely
scrutinized because judgments as to partic-
ular factors, although made in the best of
faith, could lead to widely divergent results.
(2) Because assessment is an administrative pro-
cedure and calls for approximations and judg-
ments on matters where there may be a margin
for difference of opinion, the law contemplates
a wide discretion be accorded the assessors and
that the assessor's action be overturned only if
it is "discriminatory or so unreasonable that
property is substantially overvalued and thus
injustice and illegality result."
In Burritt as well as Leonard Building Corporation v. City of
New York, 154 A. 2d 614 (1959), the court held that the burden of
SAVE TIME: // convenient, handwrite reply to sender on this same sheet.
-------
95
proving either the factors or method of capitalization used by
the tax board were unreasonable and fell on the challenger. Specif-
ically, in Leonard, the court noted that the tax board had no
burden to prove that the capitalization method it had used was
"a proper one or more appropriate one to employ."
Majestic Great West Savings v. Reale, 499 P. 2d 644 (1972), in-
volved a Colorado statute that listed several factors to be
considered by the tax board in its assessments. A lower court
had replaced the tax board's finding with one of its own. Thus
th» appellate court had to judge the legitimacy of two separate
assessments in light of the statutory guidelines. First, it
affirmed the trial court's finding that the tax board had totally
ignored two of the listed factors in the statute. Second, it
held that despite appearing to have been determined primarily on
two of the listed factors, the decision indicated that all of
the listed factors were at least considered. Therefore, it
affirmed the trial court's assessment.
Albemarle Electric Membership Corporation et al v. Alexander,
Sup. Ct. No. Car.r9~2 S.E. 2d 811 (1972) , is a tax assessment
case with three relevant characteristics: (1) it involved a
statute that directed tax assessors to consider certain factors,
including the "market value of a company's capital stock and
debt"; (2) the Court had to review the State Tax Board's res-
ponse to "market value" which was included inter alia, and (3)
the judicial review section of North Carolina's Administrative
Procedure Act is identical to C.G.S.A. §4-183(g).
Businesses like those of the appellants were organized (with
the help of legislative incentives) because investor-owned util-
ities could not profitably provide services to rural areas of
the state. One of the results was that there existed a large
disparity between the face amount of appellants' mortgage debt
and equity and the value such debt and equity would bring should
appellants try to arrange a sale in the marketplace. The problem
for the Board was to follow the statute's dictates and yet try
to adjust for this disparity.
Appellants charged that the Board's efforts (which included
capitalization of income) resulted in a confiscatory, excessive
valuation. In analyzing its scope of review in light of North
Carolina's Administrative Procedure Act, the Court held:
(a) The assessment must be presumed to have been
made according to the statute and every
reasonable intendment will be made in support
of that presumption.
-------
96
(b) Because the duties of the Board are "quasi-judicial"
the courts ought to refrain from interference un-
less the Board's actions are found to be arbitrary
or capricious. (N.B. This would seem to suggest
that where the Connecticut agency's action is
"quasi-judicial," i..ev the action under §2(c),
the appropriate stlmcfard of review for the court
is that of C.G.S.A. §4-183(g) (6) : "arbitrary or
capricious or characterized by abuse of dis-
cretion or clearly unwarranted exercise of
discretion.") '
(c) The challenging party has the burden of proving
that the method of calculation used by the Board
was arbitrary and illegal. It must present com-
petent evidence that the assessment substantially
exceeds the true value of the property. Furthermore,
the Court found appellant had a duty to come forth
with such evidence at the Board level.
(d) The Board is not under an obligation to unquestion-
ably accept the taxpayer's own evidence: "The
futility of allowing a taxpayer to fix the final
value of his property for taxation is so apparent
it decries discussion."
II. Rent Control
Rent control statutes are remedial in nature, designed to
protect tenants from undue consequences of imperfect markets
while guaranteeing landlords 'reasonable1 returns on their
property,52 C.J.S. §55-2. In construing such statutes, courts
are to be liberal, except where the landlords' old common-law
right are at stake (in which case the statutes are to be strictly
construed in favor of those rights). Ibid. §551-6. As for
administratively imposed regulations and orders, the presumption
is in favor of conformity with the relevant statute (and regula-
tions in the case of rent orders). Such regulations and orders
will not be set aside unless plainly and palpably inconsistent
with the statute/regulation, see, e_.g_- / Grenewicz v. Ligham,
tf.J. Ill A. 2d 293 (1955) .
The rent control law of New York reflects both a statute
that in various places commands the Rent Control Administrator
to account for certain factors and a well-delevoped case law as
to judicial review of the Administrator's actions.
The basic statutory scheme calls on the Administrator to
make adjustments of maximum rents where, inter alia, the rental
income from a property yields a yearly net return of less than
6% of the value of the property. Then the statute directs the
-------
97
the Administrator to value the property at its assessed value
"except where there has been a bona fide sale...as a result of
a transaction at arm's length, on normal financing terms at a
readily ascertainable price and unaffected by special circum-
stances, " Bajart Management, Inc. v. Weaver, 185 N.Y.S. 2d 341,
343 (1959). To answer whether or not the sale was on "normal
financing terms" another part of the statute directs the Admin-
istrator to consider a list of factors, the final one of which
is a catch-all (i.e., "any other facts or circumstances which
in the agency's "judgment have bearing. ..") f Colton v. Berman,
N.Y. Ct. Aps. 287 N.Y. 2d 647, 655 (1967). The following cases
illustrate the nature of judicial reaction to agency action pur-
suant to this statutory scheme:
(a) Bajart, supra; The Rent Commissioner used the
assessed value of property the landlord had re-
cently purchased without ever considering the
possibility that the sale price should be used.
The Supreme Court (App. Div.) held that where
the statute (or regulation) mandated the use
of a specific basis for rent increases, the
Commissioner could not vary the statute (or
regulation) by adopting a different standard.
While this sounds tough, the Court's action
is instructive. It remanded the case to the
Commissioner and basically told him that all
he had to do was consider the possibility that
the sale was 'bona-fide, etc.'. If he con-
cluded to the contrary, then use of assessed
value would be acceptable.
(b) Philip-Toby Realties, Inc. v. Weaver, Sup. Ct.
Ap. Div., 186 N.W.S. 2d 465 (1959). Among legit-
imate landlord expenses included in the calculus
needed to answer whether the landlord makes at
least 6% are management fees. To deal with this,
the agency adopted schedules which matched various
rates (percentages of rental income) to classes
of buildings {size, type, etc.). These rates
would be used absent a showing of special circum-
stances by the landlord to the agency. The Court
approved the schedules as a proper exercise of the
agency's authority. "Resort to a standard rate
prevents landlords from obtaining benefits of
improvident or collusive agreements which would
be difficult to uncover," Ibid, p. 468. Further-
more, the Court put the burden on the landlord to
prove, by the evidence presented to the agency,
that the agency's adherence to its schedule was
arbitrary or unreasonable.
(c) Acker v. Bermar, 'Sup. Ct. N.Y., 283 N.Y.S. 2d 194
(1967). This case involves another "schedule"
-------
98
adopted by the agency, this time to reflect the
costs of repairs and maintenance produced by
different classes of buildings. Buildings
with 12 or fewer units were allowed 13% of
annual rent for maintenance costs. Those with
13-39 units and an elevator were allowed 8-1/2%.
Again, landlords were given the opportunity to
show the agency "special circumstances."
Petitioner's building had 8 units plus an elevat-
or. The agency informed him that absent detailed
cost information, they would use the 8-1/2% fig-
ure. He refused to supply the detail and appealed.
The court held that the "inflexible" use of the
8-1/2% figure in situations like petitioner's
was an abuse of discretion because the same
rationale (purpose behind the schedule) which
dictated higher figures for smaller buildings
dictated a different figure here. Thus, while
the court implicitly approves the use of sched-
ules, it requires the figures adopted to be
reaslistic in light of the rationale behind the
classification. Furthermore, absent such
"realistic" figures, the agency is not justified
in placing the burden of supplying alternative,
detailed cost data on the landlord. Presumably,
in such a situation the burden would rest with
the agency.
(d) Colton v. Berman, Ct. Aps. N.Y., 287 N.Y.S. 2d 64F
(1967). Tenants challenged the agency's find-
ing that the landlord has used "normal financing-"
The court found that the rent control statute in
general (and the statute's part re; "normal financ-
ing" in particular had, inter alia, two purposes:
first, to prevent uncontrolled agency discretion
yet avoid such strictures as would permit land-
lords to manipulate sales to provide a higher
rent base; second, to avoid protracted valua-
tion proceedings ("of the kind associated with
utility regulation"). Given these purposes,
the Court found:
(1) All a reviewing court can require is
that the agency's findings have a
rationale basis in the record and not
be arbitrary or capricious.
(2) All factors listed specifically in the
"normal financing" statute (see above)
must at least be considered. However,
"the catch-all 'factor' (inter alia)...
is potent evidence that the Administrator
is not to be bound by satisfaction (or
non-satisfaction) of any one standard/"
Ibid, p. 655-6.
-------
99
III. Other Areas of Law;
A. Environmental Protection; The only relevant case
located(aside from Waukegan) in this area of the
law is a helpful one. In United States Steel Corp.
v. Dept. of Environmental Resource, Pa. Cmwlth., 300
A. 2d 508 (1973), the Court reviewed a penalty assessed
against U. S. Steel by the DEP pursuant to a statute
that listed several factors for DEP's consideration.
The Court noted that in the particular ajudication1s
record concerning the basis for the penalty assessed,
there was no mention of some of the factors in the
statute. Nonetheless, the Court concluded that its
review was limited to a search for an error of law or
abuse of discretion absent which it could not "second-
guess" the imposition of the penalties, Ibid, 514.
(The Court did find an abuse of discretion in an un-
explained alteration in the penalty not related to
this memo). It's worth noting that Pennsylvania's
administrative procedure statute is not identical to
Connecticut's.
B. Minimum Wages: This area also involves a remedial
statute (like rent control) that calls for economic
calculations re: "the cost of living." In Hotel &
Restaurant Association of Kentucky v. Commissioner of
Dept. of Industrial Relations, Ct. Ap. Ky., 374 S.W.
2d 501,(1963), the Court comes to the same general
conclusion as those found in the rent control dis-
cussion above.
C. Public Utilities; See the working paper concerning
"cost of capital."
CONCLUSIONS
1. In view of the wide discretion usually accorded
agencies and the difficulty of mathematical accuracy in these
situations, the challenger must prove that the penalty deter-
mined by the formula is a substantial overvaluation of the
cost of compliance. Given the N.Y. rent control cases and the
Connecticut Administrative Procedure Act, a corollary argument
can be made.that the challenger has a duty to initially submit
evidence as to the overvaluation at the agency hearing before
a review court would even consider such a claim.
2. In creating the formula as well as setting particular
penalties, the agency must at least consider each and every one
of the factors listed in §2(b) or (c), respectively. But, in light
of the factors listed in §2(b) (c) of the catch-all phrase "all
factors which (the Commissioner) deems relevant" as well as the
-------
100
cases discussed above, absolute fidelity by the agency is owed
to no single factor. However, neither the formula nor the
penalty order may contravene the overriding legislative intent
of the statute (and regulations).
3. Schedules that depend, in part, on classification of
business or capitalization formulae are valid so long as (a)
the classification or formulae are consistent with the rationale
behind their use and (b) an opportunity is provided at the hear-
ing level for each respondent to demonstrate ."special circum-
stances" that require a deviation from the schedule/formulae
usually used. Note well, however, the agency is under no obliga-
tion to accept without question the data supplied by the respond-
ent. Indeed, if such data is obviously self-serving, the agency
can reject it. The cases (e.g. rent control) supporting this
point are further buttressed by noting that they involved an
effort to protect the interests of property owners subject to
economic regulation. Certainly an a fortiori argument can be
made that the interests of property owners subject to penalties
because they have been adjudged "wrongdoers" should not be any
greater.
-------
101
DEFERRAL OF ASSESSMENT CALCULATIONS
Three options are presented for deferring the calculation
of civil assessments. Option One involves the issuance of a
warning letter upon the discovery of a violation, and the with-
holding of the statutory notice of violation until receipt of
sufficient data. Option Two adheres more closely to the statut-
ory language; upon discovery, a notice of violation would be
issued indicating the amount of the assessment based on the
Department's best estimate. Since the statute provides for
reducing but not raising the stated amount, there would be a
compelling reason to set the assessment at the highest reasonable
figure and then to mitigate when actual cost of compliance data
becomes available. Option Three is similar to Option Two except
that the assessment would be stated in terms of the formula
rather than as a dollar amount. Each of these options raises
the question of the extent to which it is authorized by the
statute and if not, whether the Department can utilize the pro-
cedure through the exercise of its administrative discretion.
Option One is not specifically authorized by statute, and
although administrative officers have broad discretion in rule-
making, the Connecticut courts tend to scrutinize procedural
regulations more closely than they do substantive regulations.
The maximum mitigation procedure of Option Two raises no
major legal problems. It finds support in the wording of the
statute and is widely used by those federal agencies which employ
civil assessments.
Option Three appears to contradict the specific language
of the statute, but cannot be categorically ruled out. The
distinction between "amount" and "rule" is considered separ-
ately in another memo.
-------
102
TO: CPEP Staff
FROM: Phil Reed
SUBJECT: DEFERRING THE CALCULATION OF CIVIL PENALTIES
The purpose of this memorandum is to present a legal
analysis of three options for deferring the calculation of civil
penalties. As has been discussed above, calculation deferral
would give the penalties a rational economic basis and would help
minimize the administrative costs incurred in their utilization.
Preliminary studies of this subject led to the identification of
three deferral options which appeared to be legally and/or
administratively workable. This memo represents the results of
an extensive though not exhaustive inquiry into the legal issues
raised by these options. Further research is needed, but sufficient
work has been done to provide a sound gauge for assessing the three
options.
The Deferral Options
The three options have been discussed in the introductory
memorandum but warrant additional description here. Option One
involves a modification of the civil penalty assessment procedure
provided in the statute. Upon discovery of a violation the
Department would withhold the statutory notice of violation, and
would instead issue a formal warning setting out the violation
charged and indicating the potential liabilities for a civil
penalty. The warning could be issued concurrently with the
issuance of an abatement order or independently. The Department
could also provide for an informal hearing to be held at the
violator's request. The formal notice of violation would not be
issued until an engineering report had been submitted by the
violator (probably pursuant to a final abatement order) or until
the violator completed compliance with the abatement order. The
notice would include a statement of the amount of the penalty
calculated on the basis of actual cost figures and, to the extent
possible, the length of the actual period of delay. From this
point on the procedure would follow the statutory provision.
Option One would reduce the amount of investigative work required
of the Department and would therefore reduce administrative costs.
It would also enable the Department to use accurate cost of com-
pliance data as the basis of the civil penalties.
Option Two follows the statutory scheme more closely at the
possible cost of an increased administrative workload. In this
procedure the Department would issue a statutory notice of violation
-------
103
upon establishing the existence of a violation for which a civil
penalty was an appropriate remedy. The notice would indicate
the amount of the penalty to be charged which would be based
inter alia on an estimate of the cost of compliance and the dur-
ation of noncompliance. It would be costly for the Department
to do the investigative work necessary to accurately assess the
cost of compliance. There would thus be a compelling reason to
merely set the penalty at the highest reasonable figure (perhaps
at the maximum allowed by the statute and schedule). The fact
that the statute provides for reducing but not raising the pen-
alty set out in the notice of violation in the final order provides
an additional incentive for setting a high initial penalty. The
initial penalty could be mitigated if it substantially exceeded
the penalty calculated when actual cost of compliance data was
available. The mitigation could be accomplished by returning
excess payments or by deferring collection of the penalty until
engineering information was available or until compliance.
Option Three is a variant of Option Two. The difference
between the two involves the statement of the penalty in the
notice of violation. In this option the penalty would be stated
not as a dollar amount but in terms of the formula used to cal-
culate it. In theory this would give the violator reasonable
notice of the scope of this potential obligation and would limit
the department's administrative workload. The actual amount of
the penalty would be calculated at the time of compliance.
Legal Analysis
There are two key legal questions raised by these alternative
procedures. The first concerns the extent to which each is
specifically authorized by the civil penalties statute (Public
Act 73-665 Section 2). The second question is the extent to
which the Department can utilize those procedures not specifically
authorized by the statute through the exercise of its administrative
discretion.
Conclusions
The delay in issuance of the notice of violation and the
letter of warning and informal hearing included in Option One are
not specifically authorized by the statute. There are reasonable
arguments on both sides of the question as to the extent to which
the option falls within the broad purpose of the statute. The
-------
104
question of whether Option One could be adopted by the Commissioner
in the exercise of his discretion cannot be given a definitive
answer. Administrative Officers have broad discretion in rule-
making, but their actions mus
by the statute. Connecticut
in applying this standard to
stantive regulations.
-. be within the parameters established
:ourts have been somewhat stricter
arocedural regulations than to sub-
The maximum mitigation p
major legal problems. It fin<|3s
statute and is widely used by
civil penalty power.
in the notice of violation pr
rocedure of Option Two raises no
support in the wording of the
federal agencies which have the
The use of the penalty formula instead of a dollar amount
escribed by Option Three appears
to contravene the specific language of the statute. Although
the question is not closed, there is substantial evidence that
this was not in the contemplation of the legislature when it
enacted Public Act No. 73-665.
The Civil Penalties Statute and the Deferral Options
In this section the key
are discussed in terms of the;
features of each deferral option
extent to which they are specifically
authorized by the statute (Public Act 73-665 Section 2).
Option One calls for lengthy delays in the issuance of
notices of violation and injects extra notice and hearing steps
into the delay period. J
The statute is ambiguous concerning the timing of issuance
of notices of violation. It provides that
"If the commissionerjhas reason to believe that a
violation has occurred for which a civil penalty is
authorized by this section, he may send to the
violator,...a notice..."
(emphasis added) Section 2(d).
"may"
The above passage can be interpreted in two ways.
can indicate discretion or power and authority.
"may, ...6. Law To
(in the construction
The word
have liberty or power to: often
of statutes) held to mean must;
as imposing an obligation, though in every other use
-------
105
may has only a permissive or discretionary connotation."
Funk &_ Waqnall' s New Standard Dictionary 9th English
Language 1946 edition, p. 1531.
The interpretation that the term "may" should not be
treated as mandatory is given some support by the case of Broad--
river, Inc. v. City of Stamford, 158 Conn. 522, 265 A. 2d 75,
cert, denied 398 U.S. 938, 90 S.Ct. 1841, 26 L.Ed. 2d 270, in
which the court said "Legislative provisions designed to secure
order, system and dispatch in proceedings are ordinarily
directory where they are stated in affirmative terms." 158
Conn, at • The provision from the civil penalty statute
at issue is of this nature. Thus one meaning of the passage
is that the timing of notice is within the commissioner's dis-
cretion. The statute sets out seven criteria, including "the
amount of the assessment necessary to insure immediate and con-
tinued compliance (Section 2(c)(1)) which the commissioner can
consider in setting the penalty (Section 2(c)). It is reasonable
to assume that the legislature intended him to have the discretion
to delay issuing a notice until he had sufficient information to
consider those of the criteria which he deemed relevant. It
would be difficult to determine what penalty would meet the
criterion of Section 2(c)(1) without knowing the cost of compli-
ance and therefore the economic benefit of noncompliance.
It is clear that cost of compliance data could be unavailable
for a long period after discovery of the violation. Similar
arguments could be made about other criteria in Section 2(c).
Furthermore the statute specifically provides that:
The provisions of this act are in addition to and in
no way derogate from any other enforcement provisions
contained in any statute administered by the commission-
er. The powers, duties and remedies provided in such
other statutes, and the existence of or exercise of
any powers, duties or remedies hereunder or thereunder
shall not prevent the commissioner from exercising any
other powers, duties or remedies provided herein,
therein, at law or at equity.
Section 2(i).
It is clear from this provision that the civil penalty is
to be used in a way that will not weaken the commissioner's
other enforcement tools. However, if he did not have discretion
to delay imposition of the penalties it might detract from his
-------
106
ability to use other enforcement devices such as negotiation.
On the other hand it could be argued that the statute does
not provide for such discretion. The word "may" does not always
connote discretion. In several cases the Connecticut Supreme
Court has held that: "The provision that the (Medical Examining)
board 'may accept1 a license issued in another state is mandatory,
entitling an applicant to a certificate as of right if the require-
ments of the statute are fully met." State ex rel Baskin v.
C. J. Bartlett, 13 CS 463 (1945). In State ex rel Markley v.
Bartlett, 130 Conn. 88, 93, the Connecticut Supreme Court went
even further:
"The accepted rule in such cases is that if, in a
statute conferring power and authority for the benefit
of the public, or of a third person, or of individuals
generally, the word 'may1 is used, it shall be construed
as equivalent to 'shall,' and that the statute is
mandatory and not permissive or discretionary" quoting
from State .... ex^ rej^ _Fopte v. Bartholomew, 103 Conn. 607,
612.
However, in the Markley. case the Court was dealing with a
limited situation, one in which an administrative officer was
given a power "for the purpose of being used for the benefit of
persons who are specifically pointed out and with regard to whom
a definition is supplied by the Legislature of the conditions
upon which they are entitled to call for its exercise." 130
Conn. 88, 94. The basic purpose of the law was the screening of
doctors to protect the Connecticut public, but it also dealt with
the basic right of individuals to practice their profession. This
can easily be distinguished from the broad regulatory purpose of
the civil penalty statute.
In the Foote case (State ex rel Foote v. Bartholomew, supra)
the Connecticut Supreme Court considered the use of "may" in a
broader situation. In that case a taxpayer sought a writ of
mandamus to compel the board of tax relief to place certain prop-
erty on the tax rolls. The court held that although the statute
in question stated that the board "may" place property omitted
by the assessor on the tax list, it was mandatory and created a
duty. It argued that the amount of an assessment was within the
discretion and expertise of the assessor but the question of
whether property was taxable was a question of law and not within
the realm of discretion. Foote, supra, 612-617.
-------
107
Both the situation in the Markley case and that in Foote can
be distinguished from the case of the civil penalty statute. In
both of those situations the administrative body was empowered
to make a single yes/no determination in carrying out its duty
to the public. However, the civil penalty is but one of many
enforcement tools available to the commissioner. The decision
to invoke it or delay its use is not the decision to pursue an
alleged violation or ignore the violation. Thus the public is
not harmed by allowing the Commissioner discretion and neither
is the violator. The statute and regulations themselves put the
violator on notice of his potential liability for a civil penalty.
The statutory procedure also guarantees that the violator will
have notice of the commencement of civil penalty proceedings and
an opportunity to be heard prior to the assessment of any penalty.
These protections are not weakened by the procedures set out in
Option One. If anything they are strengthened.
It can be argued further that the statutory mechanism was
intended to be the sole procedure used in assessing civil penalties.
With regard to the timing of the issuance of a notice violation,
Section 2(d) could be read literally to require that the commission-
er issue the notice as soon as he had probable cause to believe
a violation had occurred (if "may" were interpreted to mean shall)
or to require that he choose between issuing the notice at that
time and not invoking a civil penalty at all (if "may" were read
in its discretionary sense). With regard to the additional
notice and hearing procedures suggested in Option One, it should
be noted that the act provides for no such procedures, and does
not specifically authorize the Commissioner to vary the procedures
prescribed. If the Legislature had intended to empower the
commissioner to take such actions it would have done so with
clear statutory provisions. The statute does specifically give
the commissioner discretion in several areas. (R.G. Section 2(c)
and (e)). It could be argued that the Legislature intended to
limit the areas of discretion to those specifically identified.
On the other hand, the Legislature would have made this limitation
expressly in the statute.
Option Two, the maximum/mitigation option, is more in tune
with the language of the statute than is Option One. The statute
clearly gives the commissioner great leeway in setting the
penalty to be stated in the notice of violation. He could clearly
levy the maximum penalty without violating the statutory provisions,
Section 2(c) provides that "in setting a civil penalty in a partic-
ular case, the commissioner shall consider all factors which he
-------
108
deems relevant, including, but not limited to "seven enumerated
criteria." The statute sets maximum penalties (Section 2 (a) (1) (4))
and requires the preparation of a schedule of penalty amounts or
ranges of amounts (Section 2 (a)). It is clear that these pro-
visions are the only limitation the Legislature sought to impose
on the commissioner's discretion to set penalties in individual
cases. The statute is equally clear in granting the commissioner
discretion to mitigate penalties in individual cases. Section
2(e) provides that: "Any civil penalty may be mitigated by the
commissioner upon such terms and conditions as he in his dis-
cretion deems proper or necessary upon consideration of the
factors set forth in subsection (b) (sic, should read (c))
hereof." Thus the statute provides clear authority for the
commissioner to follow the procedures of Option Two.
Option Three, on the other hand, appears to fly in the face
of statutory language. In this option a formula would be used
as the amount of the penalty in the notice of violation. Section
2(d) provides that the notice sent by the commissioner to the
violator "shall include:.... (3) A statement of the amount of
the civil penalty or penalties to be imposed..." The question
here turns on the meaning of the word "amount." Black defines
amount as "the effect, substance, or result; the total or
aggregate sum." Black's Law Dictionary, 4th Ed. 1968, p. 109.
It is also defined as "A sum total of numbers of quantities;....
A quantity viewed as a total; aggregate; totality," Funk &
Wagnall's, supra, p. 94. The word has been given a similar
meaning by several courts. "'Amount1 means the sum total of two
or more sums or quantities; the aggregate and is synonymous with
rate.-1- Smith v. Board of Policemen's Pension Fund of City of
Des Moines, 238 Iowa 127, 128 25 NN 2d 858. An amount need not
be a simple monetary sum. A constitutional requirement of a
statement of an amount has been held to be satisfied by a state-
ment of a percentage figure where a simple arithmetical figure
was sufficient to calculate the correct amount. Alidor v. Mobile
County Commission, 284 So. 2d 257, 291 Ala. 552. It is possible
that this argument could extend to the use of a more elaborate
formula if it were easy to understand and use and if the in-
formation necessary to use it were readily available. However,
this is not the case with the civil penalty formula based on cost
of compliance. The violator would be in a better position than
the commissioner to calculate the cost, but this would still
require substantial effort in many cases and probably would not
Bother cases distinguish "amount" from "rate" in Naylor v. Board
of Education of Fulton County, 288 SW 690, 692; 216 K 766, the
court held a notice of election to levy a school tax which gave
-------
109
satisfy the statutory mandate. It should be noted that little
authority has been found on this point and additional research
will be conducted in an attempt to further clarify this question.
In conclusion the statute clearly allows one option, is
ambiguous concerning a second and is in opposition to the third.
Option Two does not require any deviation from statutory pro-
visions . Option One provides for extra-statutory procedures and
for a somewhat liberal interpretation of the statutory provisions.
Option Three requires an extremely liberal interpretation of the
statute. The question of the legal status of Options One and
Three thus depends on the construction of the statute by the
courts, and on the extent of the discretion of the commissioner
to interpret, modify, and supplement the procedural provisions
of the civil penalties statute. These issues are discussed in
the following sections.
Administrative Discretion and Deferral Options One and Three
There are four questions of interest in this section. The
first three relate to deferral Option One. First, does the
Commissioner have discretion to make a liberal interpretation
of statutory provisions where the statute is somewhat ambiguous,
but does not specifically grant broad discretionary powers to
use its provisions? Second, does the Commissioner have dis-
cretion to delay certain procedural steps set out in the statute
to ease the administrative burdens of the statutory program or
increase its effectiveness? Third, does the Commissioner have
power to supplement the procedures laid out in the statute with
additional procedures? The fourth question deals with option
Three. Does the Commissioner have discretion to depart from
reasonably straightforward statutory language? In order to
address these questions we must look to the basic limits of
administrative power and discretion.
Administrative agencies are often said to have enormous
discretionary power. This is particularly true in fact-finding
where the agency is exercising its expertise. In such cases
courts are extremely reluctant to overturn administrative
decisions. The courts will only do so if the agency acted in
a way that was clearly illegal, arbitrary or in abuse of discretion
the rate of tax to be raised to be in violation of the statute
which required that the amount of tax be set out in the notice.
See also Hilburn v. St. Paul. M. & M. Rv. Co., 58 P 551,
23 Mont. 229.
-------
110
and such findings are rare. See Hotchkiss Grove Assn. v. Water
Resources Commission, 161 Conn. 50, 282 A. 2d 890 (1971); Mills
v. Town Plan and Zoning Commission of Town of Windsor, 145 Conn.
237, 140 A. 2d 871 (1958); Charchenko v. Kelley, 140 Conn. 210, 98
A 2d 915 (1953); Torello v. Board of Zoning Appeals of New Haven,
127 Conn. 307, 16 A. 2d 591 (1940); and Piccolo v. Town of West
Haven, 120 Conn. 449, 181 A 615 (1936); Blesso v. Board of
Plumbing and Piping Examiners, 30 CS 262 (1973). The Mills
case, supra, was one such rare case. In that case the courts
overturned a decision of the Town Plan and Zoning Commission
which changed a zoning plan and the zoning classification of a
certain property. The court based its decision on the fact that
the commission had rejected an application for a similar change
affecting the same property one month previously and there had
been no showing that the reasons for the previous denial had
been eliminated. The court held that the decision was arbitrary
and overturned it.
The Blesso case, supra, is an example of a case in which
the court upheld an agency action after a rather cursory review
of the facts. In Blesso the Board suspended the license of a
plumber upon a finding that the licensee's apprentices did not
work under direct supervision of licensed contractors as re-
quired by the regulations. The court observed that the Board
had administrative discretion; that its review was limited to
the question of whether the Board's action was arbitrary, illegal
or unreasonable, and that the evidence was sufficient to sustain
the Board's finding. The standard of illegality, arbitrariness
or abuse of direction is general and cases are treated on an ad
hoc basis.
The standards for reviewing the rule-making activities of
administrative agencies are also broad, but in such cases the
courts have a standard on which to base their judgment—the
underlying statute itself.
In identifying the specific regulatory powers held by an
agency the courts look to the statutory authorization and the
basic purposes for which the agency for which it was established.
It is clear that the Danbury planning commission
can exercise only the powers which are expressly
granted to it by statute or such as are necessary
to enable it to discharge the duties and carry
out the objectives and purposes of its creation.
-------
Ill
Aunt Hack Ridge Estates, Inc. v. Planning Commission
160 Conn. 109, 115 (1970).
The requirement that the regulations have a firm statutory basis
was well put in the following excerpt from an opinion of the
U.S. Supreme Court affirming a decision of the U.S. Circuit
Court of Appeals for the Second Circuit.
The power of an administrative officer or board
to administer a federal statute and to prescribe
rules and regulations to that end is not the power
to make law—for no such power can be delegated by
Congress but the power to adopt regulations to carry
into effect the will of Congress as expressed by the
statute. A regulation which does not do this, but
operates to create a rule out of harmony with the
statute, is a mere nullity.
Manhattan Co. v. Commissioner. 297 U.S. 129, 134 (1936).
In the Manhattan Co. case the court ruled that a_ regulation of the
Treasury Department was invalid after a thorough analysis of the
statute and the effect of the regulation.
The Connecticut courts have stated the basic limitation on
agencies' rule-making powers in a somewhat different fashion.
No administrative or regulatory body can modify,
abridge or otherwise change the statutory powers
under which it acquires its authority unless the
statute specifically grants it that power. South
East Property Owners and Presidents' Association v.
City Plan Commission, 156 Conn. 587, 592 quoting from
State ex rel Huntington v. McNulty, 151 Conn. 447,
449 (1964).
Similar language was also used in Hartford Electric Light Co. v.
Sullivan, 161 Conn. 145, 155 (1971); Finn v. Planning and Zoning
Commission, 156 Conn. 540, 546 (1968) (quoting the Huntington,
supra, language); Hammenberg v. Holloway, 131 Conn. 616 (1945);
State ex rel Baskin v. C. J. Bartlett, 13 C.S. 463 (1945) (quoting
the Manhattan Co., supra, language); Oles v. Liquor Commission,
10 CS 489, 492, 493 (1942).
In all of the above cases the courts invalidated regulations
as attempts at unauthorized amendments, modifications or
-------
112
abridgements of statutes.
In Hartford Electric Light Co. v. Sullivan, supra, a statute
provided for tax assessments on certain specified assets. The
State Tax Commissioner had by regulation provided for assessment
on a broader class of assets due to a mistaken interpretation of
the statutes. The Court held that the regulations were invalid
because they were broader than the statutes authorized and because
there was no clear grant of power in the statute for the Commission-
er to go beyond the statute in rule-making.
In South East Property Owners and Resident's Association v.
City Plan Commission the commission enacted a regulation setting
a maximum length for a certain type of street in subdivisions.
In another regulation it set up a procedure for granting
variances from the other regulations. The court found that the
statute did not authorize the Commission to grant variances and
therefore voided the offending regulation.
In Finn v. Planning and Zoning Commission, supra, the statute
in question (CGS Section 8-26) required that the Commission act
on submitted plans within 60 days, and made failure to do so
operate as approval. The Commission promulgated regulations
setting up a two stage procedure. The first step called for
the submission of an initial plan for preliminary approval.
After approval the applicant had 90 days to submit a final plan
on which the Commission would act within 60 days. The scheme
was a clear-cut attempt to draw out the approval process to enable
it to do a better job. The court invalidated the scheme. It
first noted that there was no provision in the relevant statutes
(Sections 25, 8-26 CGS) giving specific authority to the Commission
to provide for such a procedure. It then noted that "the whole
field subdivision regulation is peculiarly a creature of legis-
lation, " quoting from 2 Yokely, Zoning Law and Practice (3rd
Ed.) Section 12-3. The next link in its reasoning was the
following argument:
In order to determine whether the regulation in question
was within the authority of the Commission to enact, we
do not search for a statutory prohibition against such
enactment; rather we must search for statutory authority
for the enactment. 156 Conn, at 545 quoting from Avonside,
Inc. v. Zoning and Planning Commission, 153 Conn. 232, 236.
Finally the court noted that the statute provided for a single
-------
113
application to which the agency was to respond within 60 days.
The regulations provided for an application and a plan submission
but the court argued that in fact this meant two applications
and was an unauthorized administrative change in the statute.
Finn case is of particular relevance to the civil penalty
deferral question. There are some parallels between the Finn
commission's scheme and deferral Option One. The purpose of both
is to put off the official administrative determination so that
the administrators could operate on a more informed basis. En-
vironmental protection would appear to be as much a creature of
legislation as is zoning. There are also important differences,
however. The subdivision statute set a final deadline for com-
pletion of administrative action. The civil penalties statute
has no such deadline. The delay in the subdivision case can
well be costly to the applicant as it delays the development of
his or her land. In the civil penalty case there is no harm to
the violator unless the penalties accrue during the period of
delay (which might be the case) . Moreover, the guarantee of
actual notice of potential civil penalty liability to the
violator contemplated in Option One would give the violator an
opportunity to avoid detriment by rapidly complying with an
abatement order. The applicant had no such option under the Finn
procedure, and the court noted that the 60-day limit was "for
the protection of the subdivider." 156 Conn., at 544.
Hammerberg v. Holloway, supra , involved regulation of
milk prices. The price was to be determined in part by the
butterfat content of the milk, which was to be determined by
a standard test, the steps of which were set out in the statute.
The commission used a variant of that testing procedure which
significantly raised the possibility of inaccuracy. This
procedure was apparently within the commission's regulations, but
the court overturned commission pricing decisions based on the
deviant testing. It noted that the power to promulgate regulations
did not empower the commission to override the express provisions
of the statute.
The case of Oles v. Liquor Central Commission, supra , involved
a commission regulation calling for the certification of all em-
ployers of liquor permittees. This was promulgated pursuant to
a statutory provision prohibiting the employment of persons in
liquor-selling establishments who did not meet the standards re-
quired of permittees. A certification system for permittees was
in effect and had been upheld. A lower court overturned the
regulation holding that the certification of all employers in
-------
114
question was such an enormous task that the legislature could
not have intended that the commission undertake it.
This list of cases indicates that the Connecticut courts
will look closely at challenged regulations to determine if they
are authorized by the relevant statutes. They also suggest certain
factors to which the court pays special attention and shed some
light on the questions raised concerning deferral Options One
and Three. Before addressing these questions, however, we will
look at two cases in which the court refused to overturn regulations
even though they went beyond the specific language of the statute.
The cases in question are Dadiskos v. Liquor Control
Commission, 150 Conn. 425 (1963) and John J. McCarthy C. v. Aesop,
122 Conn. 288 (1936).
In Dadiskos, supra, the court was faced with a statute that
set out several grounds for the revocation of liquor permits
and regulations that prescribed additional grounds. The court
held that the regulations were valid. In part the division was
based on the fact that the statute included a broad grant of
powers. It authorized the commissioner to make all regulations
necessary to enforce the provisions of the act and to ensure the
proper, safe and orderly conduct in establishments with liquor
permits. It is important to note that the statutory grant of
power clearly went beyond the enforcement of the statute.
The McCarthy Co. case, supra, involved a statute requiring
the Public Utilities Commission to issue common carrier licenses
only to persons who had adequate financial responsibility. The
court upheld regulations requiring carriers to hold insurance with
a Connecticut-based company as a reasonable means of effectuating
the statutory mandate.
These cases suggest several- general lessons about regulatory
power. First, the courts do not look with favor on regulations
that go beyond the specific authorizing language of the statute.
However, where the statutory authorization goes beyond the en-
forcing act, even in very general terms, courts will uphold
administrative modification of the statutory regulation scheme.
It is not clear from the cases in which regulations were in-
validated if the statutes involved included broad grants of power
such as that in the Dadiskos case, supra. The fact that the point
was not raised suggests that the statutes did not include such
provisions. Further research can clarify this point. At any rate,
it appears that the courts view specific grants of authority as
-------
115
limiting provisions, but grant substantial discretion where
there is language suggesting a broad grant of power. This
suggests that the regulations issued under the civil penalties
statute that do not have a clear basis in the specific provisions
of the statute may be in trouble.
The above cases suggest that the Commissioner's discretion
to modify or depart from the statutory procedures is limited
in all four areas addressed by questions at the beginning
of this section. With regard to the Commissioner's intrinsic
authority to interpret ambiguous statutory provisions, it seems
clear that an administrator must have such power if he is to
effectively implement the statute. However, the above cases
suggest that in the absence of a broad grant of powers, the
Commissioner could not use an ambiguous provision as a source
of specific powers unless there was a reasonable interpreta-
tion of that provision that would authorize such powers. As to
the question of delaying statutory procedures, the Commissioner's
leeway again appears to be limited. On the one hand the
civil penalties are intended to be used in conjunction with
existing enforcement measures. This argues for discretion
to delay issuing a notice of violation while determining whether
this was an appropriate case for such a remedy. On the
other hand the statute provides for notice to people who are
assessed penalties and because penalties mount during the delay,
lengthy delays would frustrate the aim of the statutory notice
provision. There are also limits to the Commissioner's
discretion to implement extra-statutory procedures. This would
appear to be possible where the procedures clearly supplemented
statutory procedures. However, in the absence of a broad
grant of powers, procedures correlated to any statutory
purpose would not be authorized. Finally, the above cases
indicate that the Commissioner does not have discretion to
interpret a word or language in the statute as having a meaning
other than it is commonly given. Such discretion would exist
only if there were a clear statutory authorization for it.
Another point can be drawn from the cases just discussed.
With the exception of the McCarthy Co., supra, and Oles, supra,
and South East Property Owners and Residents' Association cases,
supra, each case involved a party or parties who stood to suffer
a clear-cut loss from the enforcement of the regulations in
question. In The Hartford Electric Light Co. case, supra, the
loss was a substantially increased tax bill; in the Finn case,
supra, it was a possibly long, delay in the start-of -Land develop-
ment; in the Hammerberg case, supra, it was profits of approximate-
ly $1600; in the Dadiskos case, supra, it was a liquor permit.
In the Oles case, supra, the regulation required a tremendous
increase in administrative costs and in the South East Property
Owners case, supra, the regulation may have affected the safety
-------
116
of property values in a sizable neighborhood. In contrast, it
is difficult to see what serious adverse affects would be caused
for anyone by any of the regulations contemplated in the deferral
options. There is no case language to suggest that this would
sway a court, but it does lay the foundation for an argument that
the deferral options do not represent a significant expansion of
the Commissioner's power over that set out in the statute.
-------
117
INTERPRETING "AMOUNT" AS "RATE"
This memo recapitulates the research of the memo concern-
ing statutory interpretation and applies its conclusions to the
question of whether the word "amount" in §2(d) of the Enforcement
Act may be interpreted to mean "rate." If this interpreation
is permissible, the Department can avoid premature assessment
estimates by including the formula, rather than a dollar figure,
in the Notice of Violation.
"Amount" is defined as an "aggregate" or a "totality,"
and thus differs conceptually from "rate," which must be under-
stood in relation to other factors. Thus, a strict application
of the "plain language" doctrine would seem to preclude the
Department's preferred interpretation.
Section 2 (c), however, requires the Commissioner to con-
sider at least seven factors about which he could not possibly
have information at the time of detection. Thus, a counter-
argument might be advanced that a strict interpretation of
"amount" would negate the purposes of 2(c) and constitute a
"bizarre result." If this counter-argument is not conclusive
for the Department, it may at least establish an ambiguity in
the statute, in which case the legislative history of the Act,
the administrative interpretation and the breadth generally
accorded remedial policies should weigh heavily in the Depart-
ment 's favor.
-------
118 by Glen Gross
STATUTORY CONSTRUCTION AND THE ISSUE OF
AMOUNT VS. RATE
The desirability of interpreting the word "amount" in
Section 2(d) of the Enforcement Act to mean "rate" is based on
the fact that the Commissioner does not have access to adequate
information at the time of detection and for a long while there-
after. The word "amount" does not appear to have been judicially
interpreted in Connecticut. In construing the term, six rules
of statutory construction may have some applicability:
(1) The Plain Language Doctrine.
(2) The Bizarre Result Doctrine.
(3) The Resort to Legislative History and
Statutory Purpose Rule.
(4) The Administrative Agency Interpretation Rule.
(5) The Remedial Statute Rule.
(6) The Penal Statute Rule.
The primary rule of statutory construction in Connecticut
is the "plain language" doctrine. It is the expressed intent of
the legislature which controls construction, and that intent is to
be found in the meaning of what the legislature says and not in
some unexpressed or supposed state of mind. See, e.g., Kellems
v. Brown, 313 A. 2d 53, 163 Conn. 478 (1973) appeal dismissed
409 U.S. 1099. The cases in support of this principle are legion.
This principle creates a great problem. Black defines
-------
119
"amount" as "the effect, substance, or result; the total or
aggregate sum." Black's Law Dictionary, 4th Ed. 1968, p. 109.
Funk & Wagnalls defines amount as "A sum total of numbers or
quantities;...A quantity viewed as a total; aggregate; totality."
Thus, a plain language reading of "amount" seems to preclude
grafting onto its definition a monthly rate and formula.
The major exception to the plain language rule is the "bizarre
result rule." Statutory construction which enables a statute to
become effective and workable is to be preferred over one leading
to an obviously unsupportable and bizarre result. See, e.g.,
United Aircraft Corp. v. Fusari. 311 A. 2d 63, 163 Conn. 401
(1972), and State v. Anonymous, 310 A. 2d 609, 30 Conn. Supp. 267
(1973). A good case can be made that prohibiting the use of a
"rate" in the notice of violation is in obvious contradiction to
Section 2(c) requiring the Commissioner to set penalties in
particular cases only after consideration of seven criteria about
which he cannot possibly have adequate information at the time of
detection. This is the best support for the inclusion of the
term "rate" in the notice of violation.
If the "bizarre result" theory is not conclusive for DEP
it ought to at least demonstrate the ambiguity in Section 2(d)
(use of the term "amount") when read in conjunction with Section
2(c) (assessment criteria). A third rule of construction is that
-------
120
ambiguity in the meaning of a term will lead the court to review
legislative history, the general purposes of the Act, etc.
Housing Authority of City of Waterbury v. White; 287 A. 2d 644,
29 Conn. Supp. 346. Since the legislative history, and purposes
of the Act on this point are also ambiguous, it will be necessary
to look for further guidance.
A fourth rule of construction is that an interpretation of
a statute by those charged with administering it is entitled to
great weight. Doe v. Shapiro. 302 F. Supp. 761 (1969), appeal
dismissed 396 U.S. 488, rehearing denied 397 U.S. 970. Further-
more, if an administrative interpretation has been acted on for
a number of years it will not be disturbed except for very cogent
reasons. State ex rel Bezzini v. Hines, 14 Conn. Supp. 246, no
error 53 A. 2d 99, 133 Conn. 592 (1946).
A fifth rule of construction, that remedial statutes will
be given liberal interpretation, may also be significant upon a
finding of ambiguity. State v. Vachon. 101 A. 2d 509, 140 Conn.
478 (1954). Thus, to the extent that DEP's proposed penalty is
remedial, its. calculation via notice of a "rate" ought to
be permitted.
Unfortunately, the final rule of construction of import on
this issue is that a penal statute will be construed strictly.
However, as some cases make clear, strict construction of a penal
-------
121
statute is required so that the public is provided a precise
definition of the forbidden act. Grievance Committee of the Bar
of New Haven County v. Payne, 22 A. 2d 623, 128 Conn. 325 (1941).
Thus, it is possible to distinguish those parts of a statute re-
lating to liability (and requiring strict construction) from those
parts dealing with procedural aspects of notice of extent of
remedy (and therefore subject to a liberal construction).
To summarize, DEP will have immense difficulty with over-
coming the "plain language doctrine." The only hope seems to be
to convince the court that a limited reading of the term requires
the Commissioner to assess penalties in an irrational manner.
This "bizarre result rule" then may prove conclusive. If not,
it may at least establish ambiguity which DEP can use to argue
its expertise and the liberal construction given to remedial
statutes. Counter to these arguments is the narrow construction
traditionally given penal statutes.
-------
122
III THE ASSESSMENT PERIOD ISSUE
-------
123
ASSESSMENTS FOR PAST DELAY
Unless past delay can be included in the assessment period,
civil assessments will not fully compensate for the benefits
accruing from dilatory conduct.
Past delay may be included in setting a civil assessment
through either of two methods:
(1) The creation of a rebuttable presumption that
the violation has been continuous and extends
back to an appropriate initial date; or
(2) A policy declaration that the amount of the civil
assessment will reflect the regulatee's failure
to make the appropriate initial investment.
Both methods may be effectuated through either regulations or
ad hoc decision-making.
The choice of creating a rebuttable presumption is con-
strained by the fact that the scope of judicial review accorded
to evidentiary matters is broader than that accorded to policy-
based determinations. Even if the presumption device is re-
stricted solely to calculating the amount of the remedy, it is
more likely to be reversed because it is in the traditional jud-
icial province rather than in an area of special agency expertise.
On the other hand, legal precedent on both the federal and
the state level indicates that there will be a great deal of
discretion allowed in the determination of a remedial policy.
The use of an investment decision date subsequent to the promulga-
tion of the regulations does not violate due process and should
be well within the discretionary range.
The choice between regulations and ad hoc decision-making
is relatively free, but the emphasis upon control over discretion
in the statute and its legislative history suggests that pro-
ceeding via regulation is the safer alternative.
-------
124
TO: CPEP Staff
FROM: Andy Weissman
Subject: Legal Memorandum re Penalties for Past Delay
I. Scope of Analysis
The design of the civil penalties program is directed towards presenting
the potential polluter with an investment decision for which the option of
compliance with environmental standards will be marginally more favorable than
that of continued violation and the risk of a civil penalty. In order to fur-
ther the objective of immediate, voluntary compliance, it is essential that
the penalty scheme creates incentives which can overcome the tendency to post-
pone compliance until state investigators have detected a violation. This
means that the penalty formula must take into consideration the period of
delay between either the effective date of the controlling regulations, or the
commencement of operations by a polluter, whichever is later, and the date of
detection of a violation. Including this pre-detection period of violation in
determining the amount of a penalty is doubly important because it serves to
compensate, to some extent, for the advantage that the non-complier has enjoyed
over competing firms which have conformed to environmental restrictions more
quickly.
The purpose of this memorandum is to set forth the legal considerations
and constraints relating to the inclusion of this pre-detection period of
"past delay" as a factor in determining the size of a civil penalty. The
discussion will be limited to the legal arguments, and will not include the
multifarious policy considerations which should determine the course of action
when a choice between several options is available.
II. Conclusions
There are several possible means by which the period of past delay may
be included in setting a civil penalty. The actual substantive choice of
methods for doing this is twofold:
1) A policy declaration that the fact of detection will create
a rebuttable presumption that the violation has been continuous
and extends back to an appropriate initial date.
2) A policy declaration that the crux of the civil penalty
enforcement system is the choice of an investment on an
initial date, and that the penalty will therefore reflect
the failure to make that initial investment at any time
during the period of delay.
-------
125
Both of these methods may be effectuated in either of two procedural manners:
1) Inclusion in properly promulgated regulations.
2) Development of the policy rule in the process
of ad hoc decision-making.
Together, these two sets of two options present four choices from which to
choose a Department policy. The legal risks attendant upon each of these
four options vary, and will be discussed at length in the body of this memo-
randum, but several judgments can be briefly stated.
First, the choice of creating a rebuttable presumption that a violation
extends back may be dangerous in that it operates as an admission that the
penalty calculation will be an evidentiary matter rather than a policy choice,
and, although administrative finders of fact have great leeway, there are
indications that the scope of review will be stricter with respect to evidentiary
conclusions concerning the presence of a violation than it will where choices
between remedies are concerned. At the very least, this indicates that any
presumption should be clearly stated in terms of facts considered for the pur-
poses of forming the penalty rather than finding a continuous series of violations.
As a result, the size of the additional penalty for past delay is limited by
the $25,000 maximum set by the statute. Even if a presumption relates only to
facts relevant for remedial purposes, it is probable that judicial review will
be stricter than the policy-based determination, if only because judges have a
greater confidence in judging evidentiary matters than in overturning an admin-
istrative choice relating to an area of special expertise.
Second, the legal precedent indicates that there will be a great deal of
discretion allowed in the determination of a policy calculated to effectuate
the terms and intent of a statute. Certainly the rationale for determining
a penalty in terms of the investment decision made after a polluter knew that
the civil penalties regulations were in effect should be sufficiently well-
reasoned to qualify as being within the range of reasonable administrative
choice.
Third, the choice between effectuating the policy or presumption of fact
by means of regulation or ad hoc decision is a relatively free one. The legal
precedent generally favors a flexibility in this regard, and several ad hoc
alterations of existing policy have been upheld despite the lack of advance
notice and the presence of some degree of reliance on past decisions. The
civil penalties statute, however, and, to a greater degree, the sense of the
statute created during legislative debates, may constrain this choice due to
an emphasis upon maintaining control over the Commissioner's discretion
in levying a penalty.
Fourth, whatever the policy choice is concerning these options, a full
opportunity for the presentation of all evidence relevant to any presumption
-------
126
or policy choice should be provided. In addition, it would be wise to
clearly state prior to any quasi-judicial decision the basis upon which a
penalty will be calculated. Problems of notice and due process proliferate
the cases concerning administrative adjudications, and every effort should be
made to avoid these. Once the evidence is fully and fairly before an admini-
strative tribunal the likelihood of judicial reversal, either upon grounds of
ultra vires policy choices or the sufficiency of the evidence, is slim.
III. Policy-making Discretion of An Administrative Agency
The breadth of discretion accorded to an administrative agency in
determining policies calculated to effectuate the provisions of statutes
which are within the scope of their delegated powers is considerable, but
not unlimited. This discretion is most often discussed in the context of
the two basic methods of effectuating administrative policies: The promul-
gation of rules and regulations, and the formulation of remedies following
administrative adjudication. In both situations, restrictions upon administra-
tive policy choices have been extremely limited, and, as a result, it seems
unlikely that a carefully planned use of either method will result in judicial
reversal.
A. Discretion re Rule-Making Powers
The scope of the rule-making powers of an administrative agency is broad,
and its limits are a function of the purposes and policies set forth in the
enabling legislation. The Connecticut Attorney General, 30 Op. At. Gen. 135
(March 24, 1958), described the limitations on these powers as follows, quoting
from 73 C.J.S. Section 95 at page 417:
"[A public administrative officer] may make or adopt only
rules and regulations which carry into effect the will of
the legislature as expressed by the statute, ..."
"[He] may not make or adopt a rule or regulation in con-
travention of, or out of harmony with, a statute, ... and
he may not, by the adoption of a rule or regulation, amend,
alter, enlarge, or restrict the terms of a legislative
enactment. [He may not], under the guise of regulation, ...
change the purpose and the effect of the law."
The Connecticut Supreme Court has stated rules which differ from the above
opinion semantically, but not in substantive content. Thus, in John J. McCarthy
Co. v. Alsop, 122 Conn. 288 (1937), the Court stated that a regulation by the
Public Utilities Commission must be promulgated "by virtue of express provisions
of law" or they must be rules "such as are by fair implication and intendment
incident to and included in authority expressly conferred." In Loglisci v.
-------
127
Liquor Control Commission, 123 Conn. 31 (1937), the rule stated was that
"the authority of the administrative body acting under [a legislative] grant
of power, is limited to the making of reasonable rules and regulations within
the scope of the power granted."
The generality of all of these rules indicates that each situation is
decided upon its own facts, largely on an ad hoc basis. Where challenged
regulations are approved, generally the judicial opinion will state the
general rule and conclude that the agency has not stepped beyond its bounds.
The decisions overturning adopted regulations can, however, indicate the
limitations upon agency discretion in this regard. In 01 es v. Liquor Control
Commission. 10 Conn. Sup. 489 (1942), the statute provided that no person
declared "unsuitable" could be employed on any premises where liquor was sold
for immediate consumption. The Commission adopted regulations requiring all
such employees to obtain a certificate of approval from the Commission as a
prerequisite for employment. Under the applicable statute, the Commission
had the general power to do what was "reasonably necessary for the carrying
out of the intent" of the statue.. The court held the regulation invalid as
an attempt to legislate, unreasonable and arbitrary since no contemplation of
an extensive employee permit system could be attributed to the statute.
In State ex re!. Baskin v. Bartlett. 13 Conn. Sup. 463 (1945), the
Medical Examining Board adopted regulations which required doctors with out-
of-state licenses seeking a Connecticut license to take an oral examination
with no notice of the content of the examination, and no written evaluation
of performance. The court held that although the Board had been granted the
power to establish regulations controlling the licensing of out-of-state
doctors, the particular rules promulgated were "out of harmony" with the
statute, which had provided for a written examination for another class of
license applicants.
In comparison to these cases, the Court in Dadiskos v. Liquor Control
Commission, 150 Conn. 425 (J963), upheld a regulation which added additional
grounds for revoking a liquor permit to those enumerated in the statutes.
Here the Court emphasized the general grant of administrative powers necessary
to ensure proper, safe and orderly conduct.
The generality of the guiding principles, and the fact that each case is
decided on its own facts makes the law for any given situation unpredictable.
One factor remains constant: the court will look to the statute to test whether
there was authority for the regulations, either expressly stated, reasonably
implied, or arising out of the role of the agency as the vehicle for furthering
statutory purposes. With this in mind, one must look to the civil penalties
enabling act (Public Act No. 73-665) to support proposed regulations enforcing
a penalty for past delay. Under the statute, Section 2(a), the Commissioner
is "authorized" to adopt a schedule of the amounts, or ranges of amounts, to
be assessed for each of the various types of infractions. In adopting this
schedule, he must consider the factors set forth in Section 2(b). The
inclusion of an amount for past delay within the schedules would be supported
in the statute by the provision, in Section 2(b), that "the commissioner shall
consider the amounts...of assessment necessary to insure immediate and
continued compliance " The penalty for past delay, specifically designed
-------
128
to encourage immediate, rather than delayed, compliance, should clearly be in
furtherance of this specific objective.
Section 2(c) provides guidelines for the determination of the size of a
civil penalty by the commissioner. It states that he shall consider all
relevant factors, and then lists seven enumerated factors, including the
following:
1) "The amount of assessment necessary to insure immediate and continued
compliance." [Sec. 2(c)(l)].
2. "The conduct of the person incurring the civil penalty in taking all
feasible steps or procedures necessary or appropriate to comply or
correct the violation." [Sec. 2(c)(3)].
3) "Any prior violations by such person of statutes, regulations, orders,
or permits administered, adopted or issued by the commissioner."
[Sec. 2(c)(4)].
Each of these considerations renders support for the additional penalty
for past delay. The first, as discussed above, is exactly the objective of
the added penalty. The second allows the commissioner to consider the degree
of cooperation that the polluter has exhibited in the past. The third
specifically mentions the importance of past "violations," but it is unclear
whether "violations" are limited to those which have been proven using
evidentiary submissions. Even if this were true, the third provision clearly
states that the legislature contemplated that actions prior to the violation
being considered should enter into the calculus of determining the size of
a penalty. Finally, the commissioner may "deem relevant" additional factors,
such as the competitive disadvantage suffered during the period of delay by
firms which have voluntarily and responsibly complied with statutory require-
ments, when calculating the penalty.
Taken together, then, the various provisions of Section 2(c) supply a
good deal of statutory support for any proposed regulation concerning a penalty
for past delay.
B. Remedial Discretion
The law concerning the discretion of an agency in devising and determining
appropriate remedies suffers from the same generality as it did with respect
to the scope of rule-making power. It is natural that many of the standards
are the same or similar since the manipulation of remedies is a policy-making
tool that differs from rule-making only with respect to timing and the surround-
ing forum. Whereas the former tool is categorized as "quasi-legislative" and
the latter tool is called "quasi-judicial ," limitations upon both are determined
by the general limitations upon policy-making by the administrative agency.
-------
129
The remedial area does, however, generate its own case law, and, despite
some aberrations, the resulting wide area of discretion comes across perhaps
even more clearly than in the earlier discussion. For the purpose of clarity
it is best to consider two separate issues: first, what is the measure of
discretion where the formulation or choice of remedy is concerned; second,
to what extent do administrators have the freedom to consider non-evidentiary
facts in reaching their conclusions? The answers to both of these questions are
important with respect to the choice of method by which a penalty for past
delay is levied because the options include both ad hoc adjudicative remedy
flexibility and non-evidentiary consideration of probable past, undetected
violations (or failures to invest) as part of the penalty calculation.
(1) The Formulation of Remedies
The federal courts have considered the question of the scope of administra-
tive remedial freedom in the context of federal agencies often, and the results
tend to favor considerable discretionary leeway, but there are exceptions. An
early case was F.T.C. v. Royal Milling Co.. 288 U.S. 212 (1933), where the
F.T.C. ordered the respondent to cease and desist from using a trade name which
implied that they engaged in their own milling. The Supreme Court held that
the remedy was too harsh. Trade names were valuable business assets, and the
administrative order "should go no further than is reasonably necessary to
correct the evil and preserve the rights of competitors and public." This
purpose could be served less harshly by requiring only that proper qualifying
words be used with the trade name.
A separate line of cases, concerning the National Labor Relations Board,
began with Virginia Electric & Power Co. v. NLRB. 319 U.S. 533 (1943), where
an employer had made check-off payments for employees' dues to a company union.
After finding an unfair labor practice, the Board chose to require full
reimbursement to the employees of all check-off payments as an appropriate
remedy, despite the contention that the company union had provided some services
to the workers. The Supreme Court upheld this choice of remedy with expansive
language:
"We give considerable weight to the administrative determination
[that full reimbursement was necessary to effectuate the policies
of the Act]. It should stand unless it can be shown that the order
is a patent attempt to achieve ends other than those which can
fairly be said to effectuate the policies of the Act." (319 U.S. at 540).
The Royal Milling case, supra, underwent serious modification during this
period. In Herzfeld v. F.T.C., 140 F. 2d 207 (3d Cir. 1944), Judge Learned Hand
upheld a commission order prohibiting the use of the word "Mills" by the
appellants in order to prevent the impression that they manufactured the rugs
-------
130
that they sold. Judge Hand stated that since Royal Milling the Supreme Court
had considerably circumscribed the judicial powers of review over administrative
remedies, and concluded:
"Such tribunals possess competence in their special fields which forbids
us to disturb the measure of relief which they think necessary. In
striking that balance between the conflicting interests involved which
the remedy measures, they are for all practical purposes supreme."
(140 F.2d at 209).
Jacob Siegel Co. v. F.T.C., 327 U.S. 608 (1946), confirmed the drawback
from Royal Milling. The court affirmed the power of the Circuit Court to modify
an administrative remedy (here a cease and desist order prohibiting the use of
a trade name) but reversed such an alteration because the agency had not
exceeded its allowable leeway. The scope of judicial review was stated as
extending "no further than to ascertain whether the Commission made an allowable
judgment in its choice of remedy."
NLRB v. Seven-Up Bottling Co. of Miami. Inc., 344 U.S. 344 (1953), was the
last case which undertook to support remedial discretion in an expansive manner.
The Board had previously announced (in a prior adjudication) a policy of ordering
back pay to reinstated employers to be computed on a quarterly basis. This
formula, however, served in the present case to compensate the employee in an
amount greater than his lost wages. The Court of Appeals modified the order
so that the employees were made whole, but no more. The Supreme Court reversed
this decision and held that the application of the Board's policy in the
instant case was an acceptable discretionary choice regardless of the fact
that no evidence on the record supported the quarterly back pay formula.
Subject to limitations of fairness and effectuating the purpose of the Act,
"the power [over the remedy], which is a broad discretionary one, is for the
Board to wield, not for the Courts. In fashioning remedies to undo the effects
of violations of the Act, the Board must draw on enlightenment gained from
experience." (344 U.S. at 346). "The relation of remedy to policy is peculiarly
a matter for administrative competence." (344 U.S. at 349).
The clarity of the prior cases has been obfuscated more recently. In
Audivox, Inc. v. F.T.C., 275 F.2d 685 (1st Cir. 1960), the Court rewrote an
order issued by the Commission to make it conform to similar orders issued against
the competitors of the appellant, and thus prevent unjust financial hardship.
The Supreme Court, in Local 60. United Brotherhood of Carpenters and Joiners of
America v. N.L.R.B.. 365 U.S. 651 (1961). held that the Labor Board could not
require a union to refund the dues and fees of its members when it engaged in
an unfair labor practice by exerting coercion to create an unlawful closed shop.
The facts revealed that no member had been coerced, and the Board's power was
"remedial, not p-unitive." Compare the approach of the Court in Seven-Up, supra,
when it stated that they preferred "to avoid entering into the bog of logomachy...
by debate about what is "remedial" and what is "punitive." (344 U.S. at 348).
-------
131
Gilbertville Trucking Co.. Inc. v. United States, 371 U.S. 115 (1962),
exemplifies the more recent ambivalent approach by the Supreme Court. The
I.C.C. had disapproved a proposed merger and, after finding a de facto
merger, ordered divestiture by one party of the stock of the otFFer. Divesti-
ture was clearly a remedy within the scope of the Commission's power. The
Court remanded the case to the Commission, although it cited Siege!, supra,
with approval: "Judicial review...'extends no further than to ascertain
whether the Commission made an allowable judgment in its choice of the remedy."1
The remand was ostensibly based upon the failure by the Commission to provide
evidence that such a judgment was actually made. It is more likely, however,
that the Court was trying to pressure a reconsideration of the remedy without
actually overturning the Commission's decision. This becomes apparent when
one considers the following statement, strangely juxtaposed with the quote
from Siege!:
"The choice of remedy is as important a decision as the initial
construction of the statute and finding of a violation. The
court or agency charged with this choice has a heavy responsibility
to tailor the remedy to the particular facts of each case so as to
best effectuate the remedial objectives " (371 U.S. at 130).
This apparent throwback to Royal Milling leaves the state of federal law
somewhat unclear. The Siege! doctrine, however, still remains the law, and it
is of some significance that the Court was unwilling to overrule the I.C.C. in
the Gilbertville case, supra.
Cases from other jurisdictions generally support a considerable amount of
remedial discretion, but not unanimously. In Tompkins v. Board of Regents,
299 N.Y. 469 (1949), New York's highest court reversed a lower court order
annulling a determination by the Board to revoke a medical license. The Court
approached the problem in a manner similar to Gilbertville, supra,by reminding
the Board of facts in the record that should mitigate the penalty, and stating
that such factors "should be significant to the Board in exercising its broad
discretion that is beyond our power to review." The New York courts took the
most extreme view of remedial discretion, as exemplified by Tompkins. supra, and
Barsky v. Board of Regents. 305 N.Y. 89 (1953). In the latter case the Board
suspended petitioner's license to practice medicine for six months. It was
asserted that the remedy was too severe, that the Board had ignored important
considerations, and that it had acted on matters not proper for consideration.
The Court let the order stand saying: "it is enough to say that we are wholly
without jurisdiction to review such questions."
The New York legislature responded with a statute which allowed the courts to
pass on the issue of "whether the respondent abused his discretion in imposing
the...penalty...involved in the determination." The effect of the statute can
be seen in Mitthauer v. Patterson. 8 N.Y. 2d 37 (1960), where the New York City
Transit Authority dismissed petitioner for theft while collecting train fares.
The Court of Appeals upheld a lower court reduction of the punishment to a six
month suspension, citing the newly passed statute, and despite the fact that the
dismissal was not "shocking to one's sense of fairness." Since the statute
-------
132
merely allowed review of the issue of "abuse of discretion", the Court must have
felt that such an abuse occurred even though the remedy was not patently
unreasonable.
The "abuse of discretion" standard is prevalent in other states as well,
including Connecticut (see discussion of Connecticut case law, infra). Thus,
a New Jersey court described the remedial discretion of an administrative agency
in this manner:
"The remedy is peculiarly the province of the [Agency]. The
measures taken to serve the [public] need are in no respect
arbitrary or unreasonable, or an abuse of the statutory power.
"We cannot in these circumstances substitute our judgment for
the specialized judgment of the agency entrusted with the ful-
fillment of the legislative policy, for that would constitute
the judicial exercise of the administrative function."
In re Plainfield Union water Co., 14 N.J. 296, 308 (1954).
A Pennsylvania court felt it could not "second-guess the imposition of
penalties" under a civil penalty system for the enforcement of water pollution
restrictions (35 P.S. Section 691.605), even though the size of the penalty
was thought to be "unreasonable" and "would strike one's conscience as being
unreasonable and would not 'fit' the statutory violation." The law required
that the court "must find an error of law or an abuse of discretion" before it
could modify a penalty. (The penalty was, in fact, mitigated because it had been il
legally modified upward). United States Steel Corp. v. Department of Environmental
Resources. 7 Pa. Cmwlth 429, 300 A.Zd 508 (1973).
Two recent cases focus upon the need for legislative guidelines to reduce
what would otherwise be unhampered agency discretion. The Maryland Court of
Appeals invalidated a provision for a civil penalty on this basis in County
Council v. Investors Funding Corp., 312 A.2d 225 (Md. Ct. of Ap. 1973). The
Montgomery County Council had enacted a Landlord-Tenant Relations Act to regu-
late the apartment rental business and landlord-tenant relationships, and had
provided for, inter alia, the power to impose civil penalties up to $1,000 for
any violation, and the power to impose money damage awards to either landlords
or tenants under conditions specified in the Act (Section 93 A-9, Montgomery
County Code). The Court found that the lack of guidelines left the Commission
with "unrestricted, unbridled discretion in fixing the amount of the penalty,
within broad limits, up to $1,000 without regard to the nature or gravity of
the violation." (312 A.2d at 246). The power to award money damages for
actual losses suffered due to a defective tenancy was thought not to have
this total discretion. As a result, only the civil penalties provision was
overturned as an improper delegation of legislative powers. The importance
of the decision for our purposes is, however, the fact that the Court was con-
vinced that there was not even an "abuse of discretion" limit to administrative
remedial powers under the statute.
-------
133
In Rudy v. Hollis, 500 P. 2d 97 (Wash. 1972), a Washington statute
(R.C.W. 49.60.225) authorized the State Human Rights Commission to award
monetary damages up to $1,000 in compensation for the loss of the right to be
free from discrimination in property transactions. The Court recognized that
the provision of standards or guidelines by the legislature was necessary to
define what is to be done and the administrative body which is to accomplish
it, but that the statement that the purpose was compensation was sufficient to
meet this need:
"Standards to guide administrative action need not, and cannot,
be perfectly specific. This is particularly so where the power
which is exercised is quasi-judicial in nature... All that can,
and should, be done is to define the conduct sought to be
punished, or the injury to be compensated, set out the normally
acceptable limits of punishment^or compensation, and then allow
tFe adjudicative body to determine the appropriate punishment
or compensation by applying general principles of morality and
traditional concepts of justice." (500 P. 2d at 100).
A final example of the extent to which a court will allow an administrative
agency to make policy with remedial decisions can be seen in Jackson v. Concord
Cp_._, 54 N.O. 113 (1969). Here the statute provided that the Director of the
Division on Civil Rights could issue orders to respondents and require that they
"take such affirmative action..., as, in the judgment of the director, will
effectuate the purpose of this act ..." The statute then lists several possible
actions that might be required, not including the award of damages. Nevertheless,
the court upheld an order which included compensation for added expenses in-
curred as a result of housing discrimination as within the broad range of admin-
istrative remedial discretion.
Exactly the opposite result was reached in Mendota Apartments v. District
of Columbia Commission on Human rights, 315 A. 2d 832 (1974) where the court
overturned an award of damages by the Commission when the enabling legislation
provided that the Commission could order a violator "to take such affirmative
action as will effectuate the purposes of this Article..."
Additional examples of judicial reversal of administrative remedies seem to
be scarce. In York Telephone and Telegraph Co. v. Pennsylvania Public Utilities
Commission, 121 A. 2d 605 (1956), the Court approved a civil penalty for the
violation of an order requiring the hiring of additional cable crews for the
purpose of telephone installation (under 66 P.S. Section 1491), but rejected an
additional civil penalty based upon the failure to provide service, stating that
this failure clearly was ancillary to the initial violation. This action,
however, is best explained in terms of a review of the mixed legal and factual
determination that two separate violations occurred, rather than as a review
of the remedial decision. In Department of State v. Bewley. 272 A. 2d 531 (Pa.
Cmwlth Ct.,1970), the revocation of a broker's license by the State Real
Estate Commission was reversed, but the court based its decision on the prin-
ciple that where there is administrative discretion in setting a penalty the
-------
134
agency should disclose the basis upon which it exercised its discretion (see
the Gilbertville case, supra). And in each of three cases a Pennsylvania
Court reduced administrative penalties from revocations to six month suspensions,
but in each case there was also a finding of one or more unsupportable legal
conclusions from the facts presented. State Real Estate Commission v. Campbell,
85 Dauph. 233 (Pa. Cmwlth Ct. 1966); Pennsylvania State Board of Pharmacy v7
Pastor, 88 Dauph. 273 (Pa. Cmwlth Ct. 1967); State Real Estate Commission v7
Bongiorno. 89 Dauph. 322 (Pa. Cmwlth Ct. 1968)"The key element of these cases
could be a closer scrutiny over legal conclusions than remedial choices, the former
being less dependent upon administrative expertise than the latter.
The weight of the non-Connecticut precedent appears to support the conten-
tion that administrative remedial discretion is extremely broad and subject to
few judicial modifications, except possibly where the penalty is closely connected
to an ascertainable error in law or in the application of law to the facts. The
Connecticut precedents are generally in accord with these principles as well.
A typical and oft-cited Connecticut case is Jaffe v. State Department of Health,
135 Conn. 339 (1949), where the Medical Examining Board revoked the license of
the appellant and the Court said:
"On an appeal from an administrative board we have repeatedly
stated that the function of the court is to determine whether
or not it acted illegally; and while we have frequently added
the words 'arbitrarily or in abuse of its discretion,1 this
merely points to certain types of illegality..."
This judicially declared narrow scope of review is reinforced by the pro-
visions of the Connecticut Administrative Procedure Act, 4 C.G.S.A. Section 166
et_ seq_. Section 4-183(g) of that Act sets forth the scope of judicial review
over administrative decisions in part as follows:
"The court may reverse or modify the decision if substantive
rights of the appellant have been prejudiced because the
administrative findings, inferences, conclusions, or decisions
are:
(1) in violation of constitutional or statutory
provisions;
(2) in excess of the statutory authority of the
agency;
(3) made upon unlawful procedure;
(4) affected by other error of law;
-------
135
(5) clearly erroneous in view of the reliable,
probative, and substantial evidence on the whole
record; or
(6) arbitrary or capricious or characterized by
abuse of discretion or clearly unwarranted exercise
of discretion.
The words of the A.P.A clearly reflect the rhetoric of the controlling case
law, and it is necessary to examine the cases themselves to give substance to
their general nature.
In Blesso v. Board of Plumbing and Piping Examiners, 30 Conn. Sup. 262 (1973),
the Board" found that the licensee had knowingly employed apprentices who did not
work under the direct supervision of licensed contractors as required by regu-
lation. The Court held that the Board's suspension of the license would be
reviewed only to determine whether it was "arbitrary, illegal or unreasonable
and an abuse of discretion vested in it."
In Konia v. Liquor Control Commission, 137 Conn. 327 (1950), the Commission
revoked a liquor license and the Court of Common Pleas concluded that the penalty
of full revocation was unreasonable, arbitrary, and excessive because appellant
was only a first offender. The Supreme Court reversed, stating that "... it was
within the power of the Liquor Commission either to revoke or to suspend his per-
mit... It had a discretion as to which course it would follow." Reversal or
modification of an order is appropriate "only in the event that the Commission
has acted illegally, arbitrarily or in abuse of its discretion." The Court also
stated that it was reviewing the appropriateness of the remedy "in view of all
the facts which the Commission might reasonably have found."
In Spadaro y. Liquor Control Commission, 150 Conn. 68 (1962), the Court of
Common Pleas again reversed a license revocation, this time for illegal gambling
on the premises, and was again reversed by the Supreme Court. The decision of
the Commission could not be disturbed "unless that decision was arbitrary, illegal
or so unreasonable as to constitute an abuse of discretion." Other cases decided
similarly are Paley v. Connecticut Medical Examining Board, 142 Conn. 522 (1955);
and Manfredi v. United Aircraft Corp.. 138 Conn. 23 (1951).
Two cases stated similar results, and clearly placed the burden of proof
upon the appellant. Perdue v. Zoning Board of Appeals, 118 Conn. 174 (1934);
Balog v. Liquor Control Commission. 150 Conn. 473 (1963). In the latter case
the Court said that the "burden is to show that the action of defendant in
revoking rather than suspending the permit was illegal, arbitrary, unreasonable
or in abuse of its discretion."
A final case which emphasized the degree of discretion to be accorded with
respect to remedial choices especially was Gibson v. Connecticut Medical Examining
-------
136
Board. 141 Conn. 218 (1954) where it was asserted that the prescribed penalty of
revocation was too severe. The Court said:
"The situation is analogous to the imposition of a penalty by
the court in a criminal case. If the penalty meted out is
within the limits prescribed by law, the matter lies within
the exercise of the court's discretion and cannot be success-
fully challenged unless the discretion has been abused." (141
Conn, at 230).
The only Connecticut cases which could be found that reduce the force of the
precedent discussed above are Peters v. Shapiro, 5 Conn. Cir. Ct. 603 (1969),
and Dempsey v. Tynan, 143 Conn. 210 (1956). The Peters case concerned the
refusal by the Welfare Commission to allow dental work for the appellant. The
Court recognized the purpose of allowing administrative agencies a great degree
of flexibility, but concluded that this flexibility could not "go so far as to
justify orders without a basis in evidence having rational probative force."
The Dempsey case involved a provision by which the Commissioner of Motor Vehicles
can suspend the license of a driver after an accident if the driver fails to pro-
vide security to cover possible liability. The Commissioner determines the
necessary amount of security up to $20,000 for personal injury and $1,000 for
property damage. The Court found that it was an abuse of discretion for the
Commissioner to set an amount of $800 security while refusing to accept any
evidence of an attachment which provided $800 security unless the victim said
he was fully satisfied with the attachment alone. Clearly, both of these cases
are minor difficulties when compared to the number of cases upholding remedial
discretion. They do, however, suggest that any scheme which is adopted should
provide for both fully articulated reasoning, factual findings, and policy judg-
ments at the time a civil penalty is enforced by a final order of the administra-
tive tribunal, and a complete and exhaustive opportunity for the violator to
present any and all facts relevant not only to the finding of a violation, but to
the penalty determination as well.
What conclusions can be wrought from the totality of cases, federal, out-of-
state, and Connecticut? The Connecticut precedents clearly indicate a tendency
to restrict the scope of review over remedial decisions to abuses of discretion
or illegal acts. Under this test any scheme arguably related to the purposes of
the civil penalties statute and clearly adaptable to particular factual
deviations should be sufficient. However, the Connecticut courts have not yet
faced a highly discretionary remedial scheme like the civil penalties program
(as opposed to revocation/suspension choices) and the federal and out-of-state
precedent is helpful in ascertaining a probable response in this regard. The
Connecticut courts have reviewed highly variated remedial determinations in
the workmen's compensation field, but have not decided the cases by reviewing
the size of the award, but rather discussing the validity of factual findings.
See, for example, Balkus v. Terry Steam Turbine Co., Conn. Law Journal, August 27,
1974 at p. 17.
-------
137
The federal and out-of-state cases are not conclusive, but the greater
weight is in favor of allowing a broadly discretionary remedial scheme with a
scope of review similar to the Connecticut test of illegality or abuse of
discretion. The federal cases in particular, despite some irregularity, are
cited in the relevant literature in support of this contention. Davis,
Administrative Law Treatise, Section 15.02; Jaffe, Judicial Control Over Admini-
strative Action at p. 266. In all, the force of the law appears to be behind
any novel remedial scheme which meets the requirements of furthering the purposes
of the statute and avoiding arbitrariness, especially where the particular experience
and expertise of the administrative agency are an integral part of forming the
remedy, as is true under the civil penalties provisions.
. (2) Discretion to Consider Non-Evidentiary Facts
The option of creating presumptions of evidence with respect to pre-detection
violations of environmental requirements depends to a large extent upon the dis-
cretion of an agency to consider, in formulating its remedy, facts not presented
in evidence but rather arising out of the knowledge and expertise of the administra-
tive officers. In this manner it may be acceptable to presume that present
violations have extended back to a prior date simply as a product of administrative
experience and knowledge of the probabilities of such an occurance developed
from years of experience.
The best formulation of this approach is expounded in Chicago, Burlington
and Quincy Railroad Co. v. Babcock, 204 U.S. 585 (1907), where the railroad
attacked the property assessments made by the state assessing board and sought
to enjoin taxes based thereon. One claim was that the board members used
information not properly presented before the tribunal. The Supreme Court held
that the board members could use their own judgment and knowledge, stating that,
"they express an intuition of experience which outruns analysis and sums up many
unnamed and tangled impressions; impressions which may lie beneath consciousness
without losing their worth. The Board was created for the purpose of using its
judgment and its knowledge." (204 U.S. at 598).
In N.L.R.B. v. Seven-Up Bottling Co.. 344 U.S. 344 (1953), the Court
reiterated this point when it was asserted that a chosen remedy was unsupported
by the evidence presented within the instant case: "... in devising a remedy
the Board is not confined to the record of a particular proceeding. 'Cumulative
experience1 begets understanding and insight by which judgments not objectively
demonstrable are validated or qualified or invalidated." (344 U.S. at 349).
In People ex rel. Fordham Manor Reformed Church v. Ualsh. 244 N.Y. 280 (1927),
Chief Judge Cardozo overruled an order by a zoning board allowing a variance, but
in doing so emphasized that the reason was not that the Board had considered
unproffered evidence. In fact, he stated that the members could reach a
-------
138
decision based on their own knowledge without any witnesses at all. The reversal
was necessary, however, because in the event that personal knowledge is used, the
Board must set forth the facts known to its members but not otherwise disclosed.
The relevant Connecticut cases are all zoning cases as well. In each of a
number of cases, the Connecticut Supreme Court has held that the zoning board may
act upon facts not produced at the hearing that were products of their own know-
ledge or observation. Parsons v. Board of Zoning Appeals, 140 Conn 290 (1953);
Blakeman v. Planning Commission, 152 Conn. 303 (1965); Forest Construction Co. v.
Planning and Zoning Commission, 155 Conn. 669 (1967); Welch v. Zoning Board of
Appeals, 158 Conn. 208 (1969). The Parsons cases added a requirement that "the
conduct of the hearing shall not violate the fundamentals of natural justice."
See also Woodbury v. Zoning Board of Review. 82 A. 2d 164 (R.I. S. Ct. 1951),
a Rhode Island case where the Court emphasized that the agency is presumed to
have "special knowledge" of those matters which are part and parcel of their
administrative duties.
Professor Davis, in his administrative law treatise, makes a distinction
between "legislative facts" and "adjudicative facts" which has gained widespread
acceptance. Davis, Administrative Law Treatise, Section 15.03. Legislative facts
are those which enter into the development of law and policy, which do not concern
solely the immediate parties, and which help the tribunal to exercise its judgment
or discretion in determining what course of action to take. Adjudicative facts,
on the other hand, are those concerning the immediate parties; ones which would
go to the jury in a judicial case. Davis concludes that "findings or assumptions
of legislative facts need not be, frequently are not, and sometimes cannot be
supported by evidence." (Section 15.03 at p. 353).
The tone of the Davis piece places some obstacles in the way of ad hoc
presumptions or assumptions relating to the determination of remedies in parti-
cular cases. These facts certainly "concern the immediate parties," in fact,
they determine the activities in which those parties have engaged. In addition
remedial facts normally go to the jury in civil cases. Davis, then, would appear
to favor allowing presumptions only with respect to general policy choices which
clearly affect several parties. The cases cited, however, convey a somewhat differer
impression. One major case is United States v. Aluminum Ce. of America> 143
F. 2d 416 (2d Cir. 1945), [AlcoaJ, where Judge Learned Hand refused to look at
an outside report to determine aluminum production for the purposes of findings
of facts, because the appellate court could do no more than "notice" the report
as newly discovered evidence and remand the issue to the trial court. But for
the purposes of determining an appropriate remedy, he would take notice and
rely upon the findings of the report. This dichotomy between fact-finding and
remedial determination is supported by Gibson y. Connecticut Medical Examining
Board, 141 Conn. 218 (1954), discussed more fully, supra, where the Court
likened the choice of penalty by the agency to the imposition of a criminal
sentence. Note that in Williams v. New York, 337 U.S. 241 (1949), the Supreme
Court held that a judge in sentencing a convicted defendant is not limited to
-------
139
the use of Information received in open court. Davis reacts to the Hi 11 Jams
case by saying: "If this is the guide for use of extra-record information when
a life is at stake, what is the guide when a sum of money or a license or a cease
and desist order is at stake?" Davis goes on to contend, however, that the
touchstone is not the remedial versus fact-finding distinction, but rather the
dichotomy between the use of general knowledge and particular facts.
A final series of cases reinforces the sense that the law in this area is
unclear, and that an agency proceeds at some risk when choosing to apply
presumptions or assumptions based upon its own expertise. In Summer & Co. v.
Erie Railroad Co.. 255 I.C.C. 475 (1943), the plaintiff brought proceedings
before the Commission for a reasonable rate order and reparations for past
excessive charges. The Commission had previously, in other adjudications, set
forth a presumption that rates greater than 70% of the basic scale of rates
on iron and steel products were unreasonable per_se_. Plaintiff relied upon this
series of decisions and presented no evidence of unreasonableness other than
an excess over the 70% figure. The railroad did offer proof of reasonableness.
Nevertheless, Division 3 of the I.C.C. held that the presumption should control.
A federal district court reversed this decision, stating that a determination
must be grounded upon evidence given during the required hearing. The full
Commission then reasserted the supremacy of the presumption, 262 I.C.C. 43 (1945),
on the basis that it was "impracticable and unnecessary to undertake a widespread
and expensive investigation in each and every case." The federal district court
upheld the order on the basis of the evidence presented, but objected to
the reasoning of the Commission with respect to the presumption. Davis concludes
that the use of the 70% figure in prior cases could be used as a substitute for
evidence in later cases, and he cites various hard and fast rules, such as the
irrebuttable presumption in many jurisdictions that children below the age of
seven are not capable of the state of mind necessary to find them liable for
intentional torts, which were developed in this manner. The difficulty is that
for our purposes, one could not point to a long line of traditional decisions
relying on a presumption of past violation before the date of detection. But
the I.C.C. cases are more helpful, and one should note that the 70% rule is
still in effect. Continental Foundry & Machine Co. v. Baltimore & Ohio Railroad
Co^, 296 I.C.C. 411, 421 (1955); Summer & Co v. Chesapeake & Ohio Railroad Co.,
299 I.C.C. 625 (1956). And the hesitance displayeoTby the district courts in
the Summer cases may be explained in terms bf the apparent irrebuttable quality
of the presumption. Thus, a clearly rebuttable presumption may be an acceptable
administrative policy.
Finally, some difficulties with respect to the official notice of facts
not presented at a hearing may be caused by the provision of the Connecticut
Administrative Procedure Act, 4 C.G.S.A. Section 166 ejt s§£. The Act considers
the question of official notice in Section 4-178(4):
"... notice may be taken of generally recognized technical or
scientific facts within the agency's specialized knowledge.
Parties shall be notified either before or during the hearing,
or by reference in preliminary reports or otherwise, of the
material noticed, ... and they shall be afforded an opportunity
to contest the material so noticed. The agency's experience,
technical competence and specialized knowledge may be utilized
in the evaluation of evidence."
-------
140
The scope of the power to officially notice facts is unclear as stated
above, and no cases could be found addressing the issue. Notice is limited
to "generally recognized technical or scientific facts," and it is unclear
the degree to which facts noticed must be "technical" or "scientific." It
is at least arguable that any factual assumptions made by a hearing examiner
that relate to the likelihood of violations prior to detection would be
supportable if they involve some knowledge of the steps which are generally
taken to comply with the relevant restrictions. In addition, the Act's
provision for the use of "experience" and "specialized knowledge" with respect
to the evaluation of the evidence is somewhat broader than the provision for
official notice. Thus, it should be the case that a more expansive use of
facts and general knowledge outside of the evidence presented at the hearing
would be possible when the tribunal sets a penalty, which involves evaluation
rather than fact-finding, than when the tribunal actually determines whether a
present violation has occurred.
In any case, it should be recognized that the A.P.A. clearly sets forth a
policy of advance notice of the facts to be independently recognized by the
tribunal. Note, however, that this clause in the Act may relate only to official
notice in the process of fact-finding, and not in the process of evaluating the
facts. In terms of statutory construction this interpretation makes sense because
the notice requirement follows the provisions for official notice in fact-finding,
and appears to serve as a limiting principle, but precedes the clause concerning
the evaluation of facts. In addition, this interpretation is reasonable since
the factors entering into the evaluation of evidence are more likely to be
impressions gathered from experience which are not capable of clear elucidation.
The caveat remains, however, that a court will strictly construe any failure to
give notice because of both the clear intent of the A.P.A. to provide notice, and
notions of fundamental fairness.
Altogether, the option of creating presumptions or assumptions of fact
concerning activities prior to the date of detection is not precluded, but may
be risky. There is precedent for the use of such presumptions in both adjudi-
cative decisions (see the Summer cases, supra) and administrative regulations.
The precedent that could be found for the latter proposition is the E.P.A. guide-
lines for the assessment of civil penalties under Section 14(a) of the Federal
Insecticide, Fungicide, and Rodenticide Act [7 U.S.C. 136-1(a)], as stated in
39 Fed. Reg. 27711 (July, 31, 1974). There the Agency creates a presumption by
regulation that the assessment of a civil penalty will not affect the ability
of a firm to continue business, this factor being a consideration required to be
made by the Administrator prior to setting a penalty under the statute. The regu-
lation has not, however, been judicially tested. It is likely that similar types of
regulations could be found through an exhaustive search of the regulations
promulgated by various federal agencies.
If the presumption option is chosen, clear provisions for advance notice
should be made, and a definite dichotomy sould be emphasized between a presump-
tion for the purposes of determining the appropriate penalty, and one which
relates to the actual finding of a violation.
-------
141
III. The Choice Between Setting Policies by Regulation and by Ad Hoc
Adjudicative Decisions
The law in this area is fairly clear, at least in the federal sector.
Relevant Connecticut precedent, on the other hand, is simply unavailable. The
major case is S.E.C. v. Chenery Corp.. 332 U.S. 194 (1947), where the Supreme
Court stated a preference for the use of regulations as a matter of policy but
clearly held that it was a discretionary choice left to the agency:
"Since the Commission, unlike a court, does have the ability
to make new law prospectively through the exercise of its rule-
making powers, it has less reason to rely upon ad hoc adjudication
to formulate new standards of conduct The function of filling
in the interstices of the [statute] should be performed, as
much as possible, through this quasi-legislative promulgation of
rules to be applied in the future. But any rigid requirement
to that effect would make the administrative process inflexible
and incapable of dealing with many of the specialized problems
which arise....In performing its important functions... an
administrative agency must be equipped to act either by general
rule or by individual order.
"[The] agency may not have had sufficient experience with a
problem to warrant rigidity in its tentative judgment into a
hard and fast rule. Or the problem may be so specialized and
varying in nature as to be impossible of capture within the
boundaries of a general rule. In these situations, the agency
must retain power to deal with the problems on a case-to-case
basis if the administrative process is to be effective....And
the choice between proceeding by general rule or by individual,
ad hoc litigation is one that lies primarily in the informal
discretion of the administrative agency." (322 U.S. at 202-203).
In N.L.R.B. v. A.P.W. Products Co.. 316 F. 2d 899 (2d Cir. 1963), the Board
altered a'"26"year" poTicy concerning how to compute the employer's back pay
liability to a reinstated employee. The Court of Appeals enforced the order
nonetheless, even though the Board failed to give notice of the proposed change
prior to or during the adjudication. The Court held that the Board could have
proceeded in rule-making fashion, but the question before it was "not one of
wisdom but of authority," and the adjudicative process of agencies, like that
of courts, "gives birth to 'rules' which may apply for the past, future, or both."
The choice of method is "a question of judgment, not power."
Similarly, in Connecticut Limousine Service, Inc. v. United States, 281 F.
Supp. 681 (D. Conn. 1968), the Court upheld an I.C.C. order denying the appli-
cation of the limousine service for removal of a restriction limiting the number
-------
142
of passengers in any vehicle. Plaintiff had argued that the Commission was
required to proceed under its rule-making powers because the grounds of the
denial were that the removal might create a new type of service. This was
asserted to be the type of determination that was a "rule" under the definition
of the federal Administrative Procedure Act, 5 U.S.C. Section 551 et^ seg_. The
Act defined a rule as "the whole or a part of any agency statement of general or
particular applicability and future effect designed to implement, interpret or
prescribe law or policy..." The Court held that this provision did not preclude
adjudicative policy-making, and that "the choice between proceeding by rule
and by ad_ hoc litigation lies primarily in the informal discretion of the
administrative agency."
The only case implying some control over this freedom of choice is N.L.R.B.
v. Majestic Weaving Co., Inc., 355 F. 2d 854 (2d Cir. 1966). There the Board
changed a 15 year policy of allowing conditional agreements between an employer
and an unrecognized union effective upon the attainment of majority support by
that union in the bargaining unit as being short of an unfair labor practice
for unlawful assistance to an organizing union. The Court stated that it had
no difficulty finding the substance of the altered policy to be within the dis-
cretion of the Board. But an adjudicative formulation of a new rule branding
as unfair, conduct stamped fair at the time the party acted raises "judicial
hackles" more disturbing than those where there is an imposition of a more
severe remedy for conduct already prohibited. "Every case of first impression
has a retroactive effect, whether the new principle is announced by a court or
by an administrative agency," but a case of second impression changing the
scope of what is considered to be illegal is one where it is particulary impor-
tant to take full advantage of the power to act prospectively, whether by rule-
making or adjudication.
The cases discussed above indicate fairly clearly that the choice of a
vehicle for determining remedial policy, as between ad hoc adjudications and
officially promulgated regulations, is a free one. TFe only case questioning
the discretion of an agency in making this choice distinguished the alteration
of a remedial policy from that of a substantive policy delineating prohibited
conduct. The degree of discretion that the administrative policy-makers for
the civil penalties program should have in choosing the means of effectuating
remedial policy should be even greater, since there is no fairness question with
respect to the alteration of previously developed expectations concerning the
size of civil penalties for pollution violations. This fact notwithstanding,
the Department would be wise to clarify in advance of the penalty determination
the fact that the period of past delay will be a major factor.
One element may serve to restrict the discretion of the Department in
choosing between regulations and adjudicative decisions, and that is the legis-
lative history of the enabling act. In both houses of the legislature there
were expressions of hesitance on the part of those opposing the bill to grant
the Commissioner the broad power to invoke civil penalties up to $25,000. In
the Senate, Senator Costello responded to this apprehensiveness by emphasizing
-------
143
that the Commissioner must "establish through regulation the guidelines
criteria and a schedule of fines that may be imposed, and this must go through
the entire regulation process which all state agencies go through..." (Senate
debate., May 15, 1973). In the House of Representatives, Representative AvcoVJie
responded in like manner: "...the Commissioner can't do nothing [sic! under ^ne
laws that we've passed without public hearings. Further,,..these penalties will
not... become effective until the Regulations Review Board...approves them."
(House debate, May 23, 1973).
Although these statements are surely not conclusive, and the latter one
appears to be directed towards the adoption of a penalty schedule more than
anything else, a court could easily find the tone of the legislature to be pqe
of strict control over the potential discretion of the Commissioner, thus
reducing administrative discretion in general. In particular, both men appeared
to rely upon the importance of the rigorous procedures required before g regur
lation becomes effective in convincing their colleagues that the Commissioner^
discretion was, in fact, circumscribed. As a result, the choice of the adjud1!-
cative policy route with respect to this particular statute is more risky than
the general legal discussion above would indicate. In making this policy
choice, the Commissioner should be aware of the fact that an avoidance of the
rigid rule-making process creates some incalculably greater probability that
a particular policy will be overturned by the courts.
-------
144
ASSESSMENTS DURING LITIGATIVE DELAY (I)
This memo concludes that assessments which accrue during
litigation are legally justifiable for the following reasons:
(1) No regulatee is forced to violate the law in
order to test the validity of the civil assess-
ment statute and regulations.
(2) Since the assessment merely equalize the benefits
of delay, no regulatee is harmed financially for
pursuing the legal process.
(3) Assessments during the period of litigative
delay protect the rights of innocent competitors.
(4) Regulatees are protected from any possible in-
justice by court discretion to stay the accumula-
tion of assessments.
There are two basic approaches available to the Department
for assessment accumulation:
(1) Estimate the time required for litigative pro-
ceedings and include this period in the calcula-
tion of the initial lump-sum amount. This amount
would be subject to a $25,000 maximum.
(2) Use the $1,000 per day assessment for continued
violation after final agency disposition. This
approach does not reach the benefits of delay
during agency hearings.
A mixture of the two approaches seems best. The Department
could, for instance, use the lump-sum method to cover delay
during hearings, and the daily assessment method to cover delay
during court appeals.
If the daily assessment approach is adopted, the hearing
officer or the Commissioner could supplement the record with a
report judging the sincerity of the regulatee in pursuing his
appeal and calculating the economic benefit that will accrue to
him during the course of the litigation.
-------
145
PENALTIES FOR LITIGATIVE DELAY
Program Objectives
The D.E.P. wishes to tax away the cost-saving benefit to a source who
fails to make an investment in pollution control. Those benefits begin
to accrue at the point that investment should have started and continue
accumulating until compliance with environmental standards has finally
been achieved. It follows that benefits accrue during the pendency of
litigation and provide economic incentive to litigate even where failure
in agency and judicial proceedings is expected. Thus, in addition to in-
suring that non-compliance is unprofitable and repairing the financial
harm done to law-abiding economic competitors, a third goal of D.E.P.'s pen-
alty program is to deter meritless litigation.
Penalty Options for Litigative Delay
Penalties which increase in size as a function of litigative delay may
be calculated in two ways under the Enforcement Act. Both options use the
following formula to calculate the amount of the penalty:
(Period of Delay)(Cost of Capital)(Cost of Compliance) = Civil Penalty.
The amount of the penalty assessed under both options is, therefore, the
same. However, the options differ in the procedures by which the penalty
is assessed. As is often the case, procedural differences influence the
legal issues which must be considered.
Option One: The first option is to estimate the time required for
litigative proceedings (both administrative hearing and court appeals). The
formula may then be used to calculate a lump-sum amount to be included as
part of the penalty for initial violation of the law. Thus, the penalty
for litigative delay would be joined with the penalty for past delay and
together would be subject to a $25,000 maximum.
The $25,000 limit for both penalties is, of course, a severe disadvantage
for this option. In those cases where the cost of compliance is high, benefits
of delay will be correspondingly great and the $25,000 limit will be reached
after a short period of time. This means that much of the cost savings during
litigation will not be taxed via option one. Unfortunately, cases where the
cost of compliance are great tend to be the cases involving the greatest en-
vironmental damage and where rapid abatement is the most desirable.
In order to insure that the estimates of delay are not longer than the
actual period of litigation delay, provision can be made for correction of
the penalty assessment period when litigation is completed, and consequently,
for lowering of the penalty (under the authority of Section 2(e) of the Act).
For example, a regulatee who does not choose to take a court appeal will
have the entire estimate period for judicial review removed from the calculation.
-------
146
This will lead to a substantial decrease in the amount of his penalty. It
should "be noted, however, that another disadvantage of option one is that
Section 2(d) of the Act prohibits raising the penalty. Thus, vhen the
department's estimate understates the actual length of delay, the regulatee
benefits and thus has every incentive to delay.
Option Two; The second possible method of penalizing litigative delay
is to use the daily penalties of up to $1,000 per day for continued violation
after final agency disposition of the case. The "Cost of Compliance" formula
could be used to determine the daily penalty. There are two readily apparent
problems with the option. First, it does not reach the benefits of delay
during agency hearings. Second, the burden of proving violation on a daily
basis imposes great administrative costs. The advantages of the option
are also obvious. The $25,000 limit on the penalty for initial violation
is no longer a problem. Penalties for appelate delay can go as high as
the benefits to the regulatee. Moreover, "benefits from litigative delay
which lasts longer than in the usual case will be taxed.
Mixed Options; There is no inconsistency in D.E.P.'s use of both
methods of assessing the penalty for litigative delay—provided no period
is counted twice„ A natural arrangement would be to use the lump-sum method
in option one to cover delay during the hearings, and to use the daily penalty
method in option two to cover the benefits from court appeals. Other mixes
are possible. The "best" mix will depend on both practical factors and
legal considerations which are discussed below.
Legal Considerations
The legal issues surrounding D.E.P.'s proposed penalties for litigative
delay will undoubtedly be challenged on the basis of constitutionality and
statutory authority. No other penalties for litigative delay as comprehensive
as those proposed by D.E.P. have been discovered in Connecticut, federal or
other jurisdictions. Reasoning, then, must be by analogy to similar problems.
The Ruling of Ex Parte Young
Statement of the Problem.
Any penalty that is unreasonably large—regardless of its method of
calculation—violates due process of law. One test of the unreasonableness
of a penalty is related to its burdening of access to the courts. This rule
was first announced in the Ex Parte Young 209 U.S. 123 (1907). In the Young
case, railroads operating in Minnesota were told to establish their shipping
fees at a rate fixed by statute or by the state railroad commission. Violators
(including corporations, officers, and employees) of commission orders were
subject to civil penalties of $2,500 to $5,000 for a first offense and up
to $10,000 for subsequent violations. Violators of statutory rates faced
criminal fines of up to $5,000, imprisonment for up to 5 years, or both. The
only method open to the railroads to test the validity of the statute or
commission order (i.e. to determine whether or not they were "confiscatory*)
-------
147
was to violate the lav or order and avait prosecution.
The Supreme Court held that Minnesota's statutes vere an unconstitutional
violation of equal protection of the lav because of their severe penalties.
"If it turns out_that the rates are too lov Ao provide a return
upon investments/ then they are illegal. Nov to impose upon a
party interested the burden of obtaining a judicial decision of
such a question (no prior hearing having ever been given) only
upon the condition that if unsuccessful he must suffer imprison-
ment and pay fines as provided in these acts, is, in effect, to
close up all approaches to the courts, and thus prevent any
hearing upon the question vhether the rates as provided by the
acts are not too lov, and therefore invalid."
The Young case thus establishes in certain cases a balancing test
betveen the right of the government to compel obedience and the right of
regulatees to judicial reviev of the validity of statutes and orders. The
Young rule prohibits the state from turning the opportunity for Judicial
reviev into a gamble that is not vorth taking. "The right to a judicial
reviev must be substantial, adequate and safely available." Wadley So. Ry.
v. Georgia, 235 U.S. 651, 66l (191*0.
Methods of Bypassing the Young Rule.
The Ex Parte Young rule applies vhen unreasonable penalties bar the sole
access to the courts. By implication, there are three vays of avoiding the
problem. The first method is to provide alternative access to the court
vhich does not entail the risk of a high penalty. The second method is
to prescribe penalties vhich are high enough to insure compliance vhile
not high enough to create a bar to court reviev. The third method is to
establish the claim that penalties are actually compensation for damage
done to innocent parties.
1. Alternative access to the courts.
The court in both the Young and Waflley cases cited with approval the
folloving dicta in Cotting v. Kansas City Stockyards, 183 U.S. 79, 102;
"It is doubtless true that the State may impose penalties
such as vill tend to compel obedience to its mandates by
all, individuals or corporations, and if extreme and
cumulative penalties are imposed only after there has been
a final determination of the validity of the statute, the
question vould be very different from that here presented."
Thus, once an order has been found to be valid, penalties high enough to
insure obedience may be imposed because access to the courts is no longer
a consideration.
The corollary to the rule stated in Cotting is that vhere a party has
-------
148
had an unpenalized opportunity to challenge an order, "but fails tq dp so,
then the agency (and the courts) may assume tacit acceptance of the validity
of the order. High penalties are therefore lawful. This is the holding of
the Wadley case:
"/0/n principle, and on the authority of all that has been
said on the subject, there is no room to doubt the power of the
state to impose a punishment heavy enough to secure obedience to
such orders after they have been found to be lawful; not to impose
a penalty for acts of disobedience, committed after the carrier
had ample opportunity to test the validity of administrative orders
and failed so to do."
Wadley p. 667
A regulatee who violates the law is generally entitled to challenge the
validity of an order as a defense even if other procedures are available
for testing it. See, e.g., United States v. McCrillis. 200 F. 2d 88U
(1st Cir. 1952). However, the Wadley holding means that violation of an
order can be sternly punished if alternate access to the courts is un-
burdened. The right to "substantial, adequate, and safely available"
judicial review must be guaranteed by at least one route to the courts —
but need not be insured by all possible routes.
An example of the kind of procedures which meet the test of providing
safe alternative access to the courts will help clarify the issue.
In Rail Coal Co. v. Ohio Industrial Commission, 236 U.S. 338
the Supreme Court found reasonable and outside the prohibition of Ex Parte
Young a substantial penalty for violation of a state industrial commission's
orders under a. screening law which determined the rates paid to coal miners.
The Court found the penalty violated no constitutional rights of employers
because of procedural protections nearly identical to the statutory
provisions for administrative hearing and appeal at D.E.P. (236 U.S. at
"The, orders of the Commission are not final, but are subject
to review under the statute of Ohio found in 103 Ohio Laws at
Page 95, where orders of the Commission are declared to be only
prima facie reasonable, and any employer or other person in
interest, being dissatisfied with any order of the Commission,
may commence an action in the Supreme Court of Ohio to vacate
or amend any such order upon the ground that the same is un-
reasonable or unlawful and the Supreme Court is authorized
to hear and determine such action and may, in its discretion
(Section ^l), suspend all or any part of the order of the
Commission. The statute makes provision for the prompt hearing
of all such actions, in preference to other civil cases, with
some exceptions. It would seem that this system of law, with
a right to review in the manner we have stated in the Supreme
Court of Ohio, has provided a system ample for the protection pf
the rights of employers."
-------
149
It ought to be clear then that civil penalties for violation of an
order to abate as prescribed in Section 2(a)(3) fall outside the rule of
Ex Parte Young. A regulatee who violates the terms of an abatement order
may have a defense for his non-compliance including the invalidity of the
order. However, civil penalties high enough to ensure compliance will not
be held to be unreasonable on account of their burdening of access to the
court. D.E.P. procedures provide ample opportunity for unfettered access
to the courts.
It is important to note, however, that alternative access to the court
is provided for all matters that might come up in a civil penalties hearing
by use of administrative and judicial declaratory judgment procedures. The
existence of declaratory judgment route as negating the Ex Parte Young rule
was suggested by the Supreme Court in St. Regis Paper Co. v. United States,
368 U.S. 208 (1961). Thus, the existence of safe alternative routes for
testing the validity of orders and for determining liability prior to
violation ought to prevent the Young rule from being a problem for D.E.P.'s
civil penalties. It would be wise, however, to remind regulatees in the
Civil Penalties regulations of the availability of the declaratory judgment
procedures.
The Reasonableness of Penalties Under Ex Farte Young
A penalty that is unreasonable under the Young rule may be reasonable
for violation of orders whose validity has been established. Thus, the
standard of reasonableness under the Young rule is more severe than the
standard of reasonableness for penalties in general. Unfortunately, no
definition of reasonableness has been spelled out for application for the
Young rule.
There are at least four plausible benchmarks with which to compare a
penalty for the purpose of determining its reasonableness.
l) The amount required to insure compliance. See e.g. Walsh,
U2 A. 2d 362 (S. Ct. Conn. 19^5).
2) The amount of damage caused by non-compliance. See e.g.
Missouri Pacific RY. Co. v. Tucker, 230 U.S. 3^ (1912).
3) The amount of benefit anticipated by the regulatee at the time
of violation, (e.g. prior to detections and prosecution).
k) The amount of actual benefit from non-compliance.
No general functional relationship exists between these alternative
standards0 The issue with regard to the Ex Parte Young problem is to determine
which of the four methods of penalty setting will yield a penalty that does not
deter a court challenge of the validity of an order.
The essence of the Young rule is that if failure in the courts leads to
a large loss then court challenges will not be taken. If failure in the
court leads to no loss, or a small one, then the penalty is reasonable. Based
on these considerations, it is clear that a penalty calculated by option four
-------
150
(merely taking avay the actual benefit of non-compliance), provides a reason-
able penalty under the Young rule. The party vho vine pays no penalty at
all. The party vho loses is in no worse position than if he complied vith
the lav or order in the first place. Hence, there is nothing to lose by
violating a lav or order to test its validity.
It should be obvious that D.E.P.'s proposed penalty based on actual
benefit vith a small and limited increment for costs imposed on the state
is reasonable under the Young rule. Moreover, the reasonableness pertains
even if the state's declaratory judgment procedures (providing another
riskless route to the courts) vere not available.
3. Penalties As Damages
Styling civil penalties as damages is a third vay around the Young rule.
Penalties based on actual benefit from non-compliance vill sometimes be
higher than penalties vhich are based on damages but often vill be lover.
There do not appear to be any cases asserting that potential liability for
severe damages creates an unconstitutional burden on access to the courts.
This result must rest on the fact that another interest, namely the right
of innocent parties to be compensated for harm done to them, is of greater
veight than the right of a party to challenge the validity of a lav or order.
It is easy to see that in some of the cases vhere liability for damages
obtains only upon violation of a statute or order vhose validity is uncertain
regulatees vill be forced to comply vith a lav or order to avoid risking pay-
ment of ruinous damage avards. Thus, to the extent that penalties are styled
as damages they may also escape the Young rule.
Burdening on Administrative Hearing and the Appeal of Final Orders vith the
Lump Sum Penalty.
The corollary to the holding that there is no right to an appeal from
an administrative decision is that the state may impose conditions on appeals
of those decisions in the dame manner that it may burden appeals of Judicial
decisionso Thus, just as the courts may impose interest on judgments vhere
there has been an unsuccessful appeal, court fees, and the filing of supersedes
bonds, the state may also burden an appeal of an administrative decision
provided the burden is not unreasonable. The lump-sum penalty proposed vill
penalize delay in compliance vith administrative orders only to the extent
of the economic benefit provided by the delay. This principle has been upheld
in litigation over patent rights, MacDonald v. Winfield, 10U F. Supp. 609
(1952), options to purchase real estate back pay oved to employees dismisse4
in violation of the National Labor Relations Act APW Products v. HLRB« 137
TJLRB 25, and in assessing interest on damage avards. The lump gum penalty
calculated on the basis of the economic benefit from violating the lav find?
its analog in court suits for damages because it is a penalty in the nature
of damages and must be distinguished from penalties in general vhich are
arbitrary in amount and vhich have the purpose of punishing the offender,
rather than of returning him and those he has injured to the status quo before
the violation occurred.
The general test determining vhether a penalty is consistent vith the
-------
151
demands of due process is the same as that stated in the Young rule. It
requires that there be a balancing of the state's interest in compelling
compliance with the law and the violator's right to appeal the validity of
administrative orders. The violator's right to test the validity of
environmental standards and state enforcement laws prior to hearing is
protected by his right to bring a declaratory judgment, C.G.S.A. Section
1T6, before he chooses to violate the law.
The availability of an alternative route into the courts protects the
violator sufficiently so that even if the burden which the lump-sum penalty
imposes on the violator who chooses to have a hearing actually penalizes
litigation (which it does not), due process requirements are satisfied.
Any limitation on due process which may appear to result from the
imposition of a daily penalty, whether such penalty is included in a lump-
sum penalty or imposed subsequently as a daily penalty must be balanced by
the effect the penalty has in enforcing economic equality among competing
corporations. By penalizing corporations for the amount of economic benefit
which they derive from unsuccessful litigation, these litigants are denied
an economic advantage which they would otherwise have over corporations who
have already complied with the law.
A lump-sum penalty which incorporates a daily fine will prevent the
Enforcement Act from being undermined by declaratory litigation. The
Connecticut APA provides that a court may grant a stay of an administrative
order while the appeal is pending C.G.S.A. Section U-166 et seq. St. Regis
Paper Co. v. U.S., 368 U.S. 208 (1961) and Genuine Parts Co. v. F.T.C.,
M5 F. 2d 1382 (197l)» can be read to imply that a stay will always be
granted where the appelant complies with procedural requirements and there
is no evidence of bad faith. A lump-sum penalty which includes a daily
fine and which provides for mitigation by the commissioner where no appeal
has been taken will circumvent the possible tolling of the cuttulative penalty
by the courts 0 It will provide protection for violators who comply without
litigating (explained earlier) and it is subject to correction.
Burdening the Appeal of a Final Order with a Cumulative Daily Fine
The case law reveals little support for the imposition of a daily fine
(cumulative penalty). Judicial objections to such fines are grounded in the
not unreasonable suspicion that such accumulated penalties could impose
ruinous burdens on violators if the law which will preclude their seeking
legal remedies against unjust laws and administrative orders. As a result
the courts have generally tolled the accumulation of daily fines so long as
an appeal was not considered frivolous or dilatory or grounded in some other
form of bad faith (see discussion of the superiority of a lump-sum penalty).
The effect of this practice has been to highlight the negative aspect of
daily penalties and to fail to articulate any standards for reasonable pen-
alties which might be permitted to accumulate daily. The bases upholding
such penalties fall into no consistent pattern although there appears to be
increasing recognition of the need to penalize dilatory litigation. See
State ex rel Railroad Commission v. Oregon R. & Nav. Co., 68 Wash. 160,
-------
152
123 Pac. 3 (1912); St. Louis Iron Mountain and St. Paul Rwy. Co. v. Paul. 173
U.S. kOk (1898); Portland R. Light & Pover^Cb. y. Portland. 210 F. 667 (19lU);
Florsheim v. Weinburger, 3^6 F. Supp. 950 (1972) and St. Regis, supra.
Where effective enforcement of environmental standards requires the
imposition of a daily penalty, the Justification must be that of reasonableness
and necessity to effectuate the purposes of the act.
CONCLUSION
From the above analysis it would appear that penalties for litigative delay-
though not without legal risk—ought to be possible. The major reasons for con-
cluding this are as follows:
1. No regulatee is forced to violate the law subject to Civil Penalties
in order to obtain agency and judicial decisions regarding the constitutionality
and validity of statutes and orders and his liability under them.
2. D.E.P.'s penalties for litigative delay are not only reasonable but
in fact merely tax the benefits of delay. No one is put into a worse financial
condition for pursuing the legal process.
3. D.E.P.'s penalties are in fact a measure of the damage to economic
competitors, thus the rights of innocent third parties not to be injured by
unlawful conduct is also an issue.
U. If the daily penalty option is chosen as the method of imposing the
penalties for litigative delay, then the regulatee is protected by court
discretion to stay accumulation where injustice might still be done—despite
the safeguards built into D.E.P.'s program. Thus, the regulatee subject to
daily penalties makes up in court protection what he loses in notice of the
limit of potential liability under the lump-sum option.
It was stated in the introduction that some mix of the two penalty
approaches available to D.E.P. might be the "best" approach. On the basis
of legal considerations the best mix would seem to be use of option one (the
lump-sum penalty) to its full extent with option two (daily penalties) reserved
for cases where:
a) he penalty for both past and litigative delay exceeded the
$25,000 limit on the penalty for initial violation, or
b) he length of litigative delay exceeds the amount estimated by
the Commissioner at the time of issuance of the notice of violation,,
Primary reliance on the lump sum option is desirable because it is
less costly administratively, it provides the regulatie with information
regarding the probable extent of his liability at an early date, and is not
subject to Judicial stay. However, availability of the daily penalties
where benefits of delay are great will be useful. Abuse by the agency is
-------
153
alvays open to judicial stay of accumulation.
If the daily penalty option is used, it would be useful in every case to
prepare a report for the judge giving two basic sorts of information:
1. (i) The Department's estimate of sincerity in pursuing litigation, and
(ii) the economic benefit that accrues during litigation and the
economic and environmental damage that continues. This certification
procedure would provide a judge who is inclined to stay penalties with
information he needs to determine the good faith of the legal challenge
(this is especially important since such decisions are likely to be
made on a "short calendar day" with little chance for argument).
2. The procedure would point out that because the penalties are geared
toward benefit, they should run even in the case of good faith appeal.
-------
154
ASSESSMENTS DURING LITIGATIVE DELAY (II)
Accrual of civil assessments during administrative hearings
is clearly within the authority granted by the Enforcement Act
under 2(c)(1) (immediate and continued compliance),2(c)(5)
(economic and financial condition of violator),and 2(c) (7)
(injury to third parties). In addition, cumulative daily assess-
ments are specifically permitted under 2(a)(2) and (3). How-
ever, under 4-183 (c) of the Connecticut APA, a stay of assess-
ment accrual is within the discretion of the courts.
Constitutionality of accumulation will only be an issue
if the potential assessment is so severe that it bars the litig-
ant from access to the courts. Since alternate access is avail-
able (through the declaratory judgment process) and since the
assessments are geared solely to the benefits of delay and hence
are neither "ruinous" nor "unreasonable," there should be no
constitutional objection.
Connecticut has not addressed the question of accrual
directly, but in response to the general question of assessment
reasonableness, in a case where a fine greatly exceeded illegal
benefit, the Connecticut court sustained the ruling that the
public interest in a uniform assessment scheme was the paramount
factor.
-------
155
II. D. Accrual of Civil Penalties During Administrative
Proceedings and Judicial Review
TO: CPEP Staff
FROM: Glen Gross DATE: November 4, 1974
I. Introduction
A. Program Objectives.
Section 2(bj of P.A. 73-665 directs the Commissioner, in
adopting schedules of civil penalties for violations, to consider
four factors:
(I) immediate and continued compliance;
(2) the character and degree of injury to, or
interference with
(a) public health, safety and welfare;
(b) the public trust in the air, water land
and other natural resources of the state; and
(c) reasonable use of property which is
caused or likely to be caused by the violation.
The legislative history of the Act amplifies these standards, and
suggests a legislative intent to eliminate the benefits from delayed
compliance and to equalize the financial position of violators with
that of those who comply with applicable standards. (See discussion of
legislative history, infra, p. 4)
In designing a program to implement this section, the Commissioner
has determined that the most effective approach to achieving these
goals is, In effect, to tax away through civil penalties the cost
savings a violator realizes from delaying compliance with applicable
standards. This approach ensures civil penalties (1) large enough
-------
156
to encourage immediate and continued compliance and to
safeguard the state's natural resources, (2) large enough
to compensate for the economic harm done to competitors who
comply with the law, and (3) no larger than necessary to
achieve compliance, thereby protecting violators from
excessive charges.
The benefits of delayed compliance begin to accrue at
the point when an investment in pollution control should have
been made, and continue accumulating until compliance with
environmental standards has finally been achieved. It follows
that benefits accrue during the pendency of litigation. Thus,
in order to provide that non-compliance is unprofitable and
to repair the financial harm done to law abiding economic
competitors of violators, civil penalties should continue to
accrue during periods of administrative proceeding and judicial
review, absent mitigating circumstances.
B. Program Operation.
The "assessment period" defined in Section 22a-6b-602U>)(.l)
ends at the point that the Commissioner issues a final order to
abate. Thus, the assessment period includes delay in compliance
due to an agency hearing. The benefits of delay which accrue
to a violator during hearing are therefore assessed away in
the initial lump-sum penalty for violation of an air emissions
standard. Extraordinary delays in compliance beyond the control
of the regulatee during the hearing stage will not be penalized.
-------
157
It is explicitly stated in Section 602(g)(3) that delays
attributable to the Department in excess of routine processing
time will not be taxed.
The "assessment period" defined in Section 22a-6b-603(bJ(l)
covers the period of time that a regulatee fails to comply with
a final order of the Commissioner. This period includes the
delay created by a violator who fails to comply with an order
while seeking judicial review. Extraordinary delays during this
period beyond the control of the violator will not be penalized.
The benefits of delay during appeal will generally be assessed
as a lump-sum penalty subject to a $25,UOO maximum. However,
the Department has retained the option offered in the Enforcement
Act of using the daily fine provisions in addition to the lump-
sum penalty in those cases where the benefits of delay are great
and the course of judicial process is lengthy.
C. Basic Legal Issues.
Three legal issues are raised by DEP's proposed accrual of
penalties during administrative proceeding and judicial review:
(1) Is the scheme authorized by the Enforcement Act?
(2) Does the proposed scheme conflict with the Connecticut
Administrative Procedures Act?
(3] Are the violator's constitutional rights to due process
violated by talcing away the pecuniary benefits he
receives from non-compliance during a hearing and
court appeals?
-------
158
ACCRUAL PENDING LITIGATION
II. Statutory Authority
I he accural of civil penalties during administrative proceedings
and judicial review seems clearly within the authority granted the
Commissioner by the Enforcement Act. Section z(b) of the Act makes
"immediate and continued compliance" the primary criterion in estab-
lishing the civil penalty schedule. Section 2(c)0) makes the
"immediate and continued compliance" the first factor to be looked
at in setting penalties in each individual case. Moreover, Section
2(c)(5) tells the Commissioner to examine the economic and financial
conditions of a violator. Finally Section 2(c)(7) directs the
Commissioner to look at the injury done to third parties. Accrual
of civil penalties during litigation is justified under all of these
sections of the Act since the benefits of non-compliance continue to
accrue during this period. Of course, the cumulative daily penalties
are specitically authorized by Sections z(a)(2) and (3).
This authority is further supported by the legislative history
of the Act. Senator Costello, in explaining the bill on the Senate
floor, stated:
"[with this billj we allow [the CommissionerJ to put
the dollar sign in front of the violator at the very outset
of the whole penalty process. And then the violator must
think about those daily fines totaling up and we hope that
by this process we will be able to get to the root of the
most important aspect of environmental legislation which is
the enforcement of the protection of our environment.
...LThis processj is one that the Federal Government has
used very effectively, particularly in the field of income
tax enforcement." Proceedings of the Senate. Connecticut
General Assembly, January Session 1973, at 3543 (.May 15,
1973).
-------
159
Similarly, Representative Wagner explained the bill on the House
floor by reciting one of the enforcement problems the bill addressed:
"Presently the procedures existent and available
to the Commissioner are unfair to most companies. What
I mean by this, Mr. Speaker, is that basically it can
be a company that may comply with an order to abate
pollution by making a capital expenditure, where another
company may not, save the capital expenditure and tie
the matter up in the courts." Procedures of the House
of Representatives, Connecticut General Assembly, January
Session, 1973, at 7781 (May Z3, 1973).
Representative Stevens, the Majority Leader, underscored this
intent:
"[N]o matter how expeditious the Attorney General
wants to be, there is no question but that attorneys can
tie him up in the Court for long periods of time, and,
quite frankly, it's cheaper for many firms to continue
to pollute, to pay attorneys' fees, write the attorneys'
fees off, than it would be to comply with the Commissioner's
order." id., at 7787.
The goals of eliminating the profits of pollution and compensating for
the harm done to the competitors of violators both suggest authority to
assess appropriate civil penalties during litigation, since both savings
to violators and harm to competitors accrue during this period. More-
over, Senator Costello's reference to the internal revenue system
underscores the suggestion, since interest accrues on tax claims during
litigation. See United States v. Chi Ids. 266 U.S. 304 (19Z4). Repre-
sentatives Wagner's and Stevens' comments expressly indicate an intent
to authorize accrual of civil penalties during litigation.
-------
160
Hi. Accrual During Litigation and the APA
The Connecticut Administrative Procedure Act is silent on the
treatment of civil penalties. Thus, it must be assumed that an order
to pay a civil penalty will be treated in the same manner as other
agency orders. The relevant portion of the APA is Section 4-183(c)
which states: "The filing of the petition [for appealJ does not
of itself stay enforcement of the agency decision. The agency may
grant or the reviewing court may order, a stay upon appropriate terms."
Under this section, the question of whether a stay of the lump sum
or cumulative penalties for judicial appeal should be granted is up
to the discretion of the court but is not automatic. Thus, there
is no conflict betweeen the APA and DEP's proposed penalties.
IV. The Constitutionality of Civil Penalty Accrual During Litigation
A. Federal Law.
1. Lump sum penalties and cumulative penalties assessed prior
to litigation.
Any penalty that is unreasonably large — regard-
less of its method of calculation — violates due process
of law. One test of the unreasonableness of a penalty is
related to its burdening of access to the courts. This
rule was first announced in Ex Parte Young, 209 U.S. 123
(1907). in the Young case, railroads operating in
Minnesota were told to establish their shipping fees at
a rate fixed by statute or by the state railroad commission.
Violators (including corporations, officers, and employees)
of commission orders were subject to civil penalties of
-------
161
$2,500 to $5,UOO for a first offense and up to $10,000 for
subsequent violations. Violators of statutory rates faced
criminal fines of up to $5,000, imprisonment for up to 5
years or both. The only method open to the railroads to test
the validity of the statute or commission order (i.e. to
determine whether or not they were "confiscatory") was to
violate the law or order and await prosecution.
The Supreme Court held that Minnesota's statutes were
an unconstitutional violation of equal protection of the
law because of their severe penalties.
"If it turns out that the rates are too Tow Lto
provide a return upon investments] then they are
illegal. Now to impose upon a party interested
the burden of obtaining a Judicial decision of
such a question (no prior hearing having ever
been given) only upon the condition that it unsuc-
cessful he must suffer imprisonment and pay fines
as provided in these acts, is, in effect, to close
up all approaches to the courts, and thus prevent
any hearing upon the question whether the rates as
provided by the acts are not too low, and therefore
invalid." Young p. 148
The Young case thus establishes in certain cases a balancing
test between the right ot the government to compel obedience
and the right of regulatees to judicial review of the validity
of statutes and orders. The Young rule prohibits the state
from turning the opportunity for judicial review into a gamble
that is not worth taking. "The right to a judicial review must
be substantial, adequate and safely available." Wadley So. Ry.
v. Georgia 235 U.S. 651, 661 11914).
-------
162
In Wadley So. Ry. v. Georgia, 235 U.S. 651, the Supreme
Court made it clear that the reasonableness of cumulative
penalties assessed prior to litigation on the constitutionality
of a statute or order (e.g. daily fines for repeated violation)
should be judged on the same grounds as lump sum penalties.
In the Wadley case, a railroad was ordered by the Georgia
railroad commission to end discrimination in its customer
policies. Instead of challenging the constitutionality of the
commission's order in the courts directly, the railroad chose
to violate the order. Georgia law permitted penalties of up
to $5,000 for every day an order of the commission was violated.
In a suit for penalties for non-compliance the commission asked
for a single penalty not to exceed $5,000 despite the tact that
the railroad had violated the order on diverse days. In
approaching the case the court stated:
"[A] statute like the one here involved (under which
penalties of $5,000 a day could be imposed for vio-
lating orders of the Commission) would be void if
access to the court to test the constitutional
validity of the requirement was denied; or, if the
right of review actually given was one of which the
carrier could not safely avail itself. In considering
that question in the present case, the constitutionality
of the act involved, is not to be decided... by the
fact that the State only asked a penalty tor one day's
disobedience instead of many." p. 666
The Young rule applies when unreasonable penalties bar the
sole access to the courts to determine the constitutionality of a
law or administrative orders. There are two readily apparent ways
of avoiding the problem. The first method is to provide at least
one alternative means of access to the court to challenge the
-------
163
constitutionality of a law or order which does not entail
the risk of a high penalty. The second method is to prescribe
penalties which while great enough to insure compliance are not
so high that they create an unreasonable bar to court review.
a. Alternative access to the courts.
The court in both the young and Wadley cases cited
with approval the following dicta in Getting v. Kansas
City Stockyards, 183 U.S. 79, 102:
"It is doubtless true that the State may impose
penalties such as will tend to compel obedience
to its mandates by all, individuals or corporations,
and if extreme and cumulative penalties are imposed
only after there has been a final determination of
the validity of the statute, the question would be
very different from that here presented."
Thus, once an order or statute has been found to be valid,
penalties high enough to insure obedience may be imposed
because access to the courts is no longer a consideration.
The corollary to the rule stated in Dotting is that
where a party has had an unpenalized opportunity to challenge
a statute or an order, but fails to do so, then the agency
(and the courts) may assume tacit acceptance of the validity
of the order. High penalties are therefore lawful. This
is the holding of the Wad!ey case:
"On principle, and on the authority of all that
has been said on the subject, there is no room to
-------
164
doubt the power of the state to impose a punish-
ment heavy enough to secure obedience to such
orders after they have been found to be lawful;
nor to impose a penalty for acts of disobedience,
committed after the carrier had ample opportunity
to test the validity of administrative orders and
failed so to do." Wadley p. 66/
In accord with the Waaley case is Gulf, Colorado &
Santa Fe Ry. v. State of Texas. 246 U.S. b8 (1918). in
the Gulf case the railroad chose to disobey the order of
a state commission 224 times rather than seek a pre-violation
judicial test ot the order. Texas law permitted penalties
of up to $5,uOO for every violation. The commission sought
enforcement of its order and the trial court assessed a
penalty of $22,400. The railroad raised the validity of
the order as a defense for its violation. The supreme Court
upheld the validity of the order and the imposition of the
fine. Speaking for the court, Justice Holmes stated:
The other point argued here is that the railroad
could not be subjected to, at most, more than one
penalty while the validity of the order was
awaiting judicial determination, Ex Parte Young,
209 U.S. 123, 147, being relied uporuBut the
statutes of Texas provided for a suit to test
the validity of the order, in a court either of
the State or of the United States. [Citations
omitted] The railroad company saw fit to await
proceedings against it, and although the case in
all its aspects is somewhat extreme the judgement
must be affirmed. Wadley So. Ry. v. Georgia.
235 U.S. 6bl, 669. Gulf p. 62.
The Madley and Gulf cases stand for the principle that
violation of an order can be sternly punished if alternate
access to the courts is unburdened. In other words, the
-------
165
right to "substantial, adequate, and safely available"
judicial review of constitutionality must be guaranteed
by at least one route to the courts — but need not be
insured by all possible routes.
The important issue raised by Wadley and Gulf is to
determine what alternative procedures for access to the
courts are sufficiently safe and available so that access
by violation may be penalized. One example ot a procedure
meeting the tests of providing safe alternative access to
the courts is given in Rail Coal Co. v. Ohio Industrial
Commission, 236 U.S. 338 (1914),, where the Supreme Court
found reasonable and outside of the prohibition of Ex.
Parte Young a penalty ot up to $600 tor violation of a state
commission's orders under a screening law which determined
the rates paid to coal miners. The court found the
penalty violated no constitutional rights of employers
because of procedural protections nearly identical to the
statutory provisions for administrative hearing and appeal
at DEP.
"The orders ot the Commission are not final, but
are subject to review under the statute or Ohio
found in 103 Ohio Laws at page 95, where orders
of the Commission are declared to be only prima
facie reasonable, and any employer or other person
in interest, being dissatisfied with any order of
the commission, may commence an action in the
Supreme Court of Ohio to vacate or amend any such
order upon the ground that the same is unreasonable
or unlawful and the Supreme Court is authorized to
hear and determine such action and may, in its
discretion (Section 41} suspend all or any part of
the order of the Commission. The statute makes
-------
166
provision for the prompt hearing of alI such
actions, in preference to other civil cases, with
some exceptions. It would seem that this system
of law, with a right to review in the manner we
have stated in the Supreme Court of Ohio, has
provided a system ample for the protection OT the
rights of employers." Rail Uoal Co.. pp. 348, 349.
It is clear that civil penalties for violation of a
UEP order to abate that has been consented to or that has
received judicial approval fall outside the application of
the Young rule. However, this is not the situation presented
by the Department's proposed accrual during litigation, since
the validity of the order to abate will ordinarily be at
issue in litigation in addition to the question of the
reasonableness of the penalty.
Fortunately, other methods of safe and available access
to the courts have been approved by the Supreme Court. In
St. Regis Paper Co. v. United States, 368 U.S. 208 (1961)
defendant paper company disobeyed an order of the Federal
Trade Commission without attempting any pre-violation
challenge to the validity of the order, in defense to a
suit by the F.T.C. Tor forfeitures for violation of the
order the paper company claimed that no safe, available
access to the courts was provided by the F.T.C. statute.
The Supreme Court upheld the imposition of the forfeitures
and rebuked the paper company for not having sought any pre-
violation access to the courts.
-------
167
[A]S this matter comes here now, the petitioner has
pursued none of these Epre-violation] remedies, and
we could not therefore say that it had "no chance"
to prevent the running of the forfeiture pending
a test of the validity of the orders. [Citations
omittedJ We note, however, that the Declaratory
Judgement Act 28 U.S.C. Z201, provides that,
"In a case of actual controversy within its
jurisdiction...any court...may declare the rights...
of any interested party seeking such declara-
tion..." This appears sufficient to meet
petitioners' needs. St. Regis, p. 227.
The importance of the St. Regis case is that it clearly
states that the existence of declaratory judgement procedures
is adequate, safe and available access to the courts. There-
fore, large lump sum and cumulative penalties may be imposed
for violation of an order or statute even when their validity
is still in question where declaratory judgement procedures
were available but unused. Connecticut provides both admini-
strative and judicial declaratory judgement procedures for
those who question the validity of a statute or order. See
C.G.S. Sections 4-175, 4-176, 52-29. No regulatee need
disobey to determine the validity of DEP's application of
an emissions standard to his case. Uvil penalties for
violation may therefore be as high as necessary to insure
obedience whether or not regulatees are deterred from
gaining access to the courts by violating the law.
-------
168
b. The reasonableness of penalties under the Young rule.
The penalties prohibited by the Young rule are those that are
"ruinous" and "unreasonable", in the Young case itself the
penalties were both criminal and civil in nature and were up
to $10,000 for a second offense (a huge sum in 19u7) and five
years imprisonment. The penalties applied to the lowest employee
as well as the railroad company and its officers. In Missouri
Pacific Ry. v. Tucker. 230 U.S. 340 penalties of $50u as
"liquidated damages" for freight charges over prescribed rates
were found to be unreasonable. The facts are as follows. The
statutory rate was $12 a barrel, the railroad charged $15.02 a
barrel and the shipper sued to collect $500 for having paid $3.02
more than the legal rate. The court felt that a penalty that was
more than a hundred times the overcharge was too enormous to be
sustained under the Young rule. In contrast, a lower federal
court found that a fine of $100 or 30 days in jail or both fine
and imprisonment was not excessive under Young. Portland Ry. Light
and Power Co. v. City of Portland. 210 Fed 667 (1914).
Unf6rtunately, n° general definition of reasonableness under
the young rule has been attempted by the courts. However, the
rationale for the rule provides some guidance. M'rst, it should
be noted that the standard of reasonableness under the Young rule
is more severe than the standard of reasonableness for penalties
in general. A penalty that is reasonable for violation of an
order whose validity has been established or tacitly accepted
may be unreasonable under the Voung rule. See the Getting, Young,
and Wadley cases. The essential logic of the Young rule is that
if failure in the courts leads to a large loss then the risk, of
a court challenge will not be taken. Thus, a second rule of
-------
169
thumb drawn from the case law is that if failure in the court
leads to no net loss, or a small one, then the penalty is
reasonable. This point is supported by the Missouri Pacific
Ky_. case where the penalty struck down was well over one hundred
times the actual benefit from violating the law.
Based on these considerations, it is liicely that DtP's
proposed penalties for litigative delay are reasonable under
the Young rule. The proposed penalties take away from a violator
only the amount that he has actually benefited from non-compliance.
A regulatee who challenges the DEP in litigation and loses is in
no worse shape than the regulatee who complies immediately upon
detection. Of course, the regulatee who prevails in litigation
pays no penalty at all. Thus, even if the state's declaratory
judgement procedures did not exist, the proposed penalties would
still satisfy the reasonableness test of the Young rule.
2. Penalties which accrue or cumulate because of or during litigation,
While any large penalty may deter regulatees from seeking
access to the courts (this is the holding of the Young case),
penalties which accrue because litigation has been undertaken
or accumulate during the pendency ot litigation are carefully
scrutinized by the courts. Not surprisingly, the availability of
alternate, unpenalized access to the courts and the reasonableness
of the penalties are two important factors in judicial discussion
of the issue. A third factor that is often cited is the merit,
-------
170
or lack thereof, in a regulatee's case, and a fourth
issue Is the right of a government to regulate access to
its adjudicative forums.
in Oklahoma Operating Co. v. Love. 317 U.S. 331 (1920)
the Supreme Court struck down penalties of $500 per day for
violation of a law setting rates for a laundry citing the Young
case. However, in dicta at the end of the case Justice Brandei's
speaking for the court stated:
The suit should, therefore, proceed for the pur-
pose of determining whether the maximum rates
fixed by the commission are, under present con-
ditions, confiscatory...If upon final hearing
the maximum rates fixed should be found not to
be confiscatory, a permanent injunction should,
nevertheless, issue to restrain enforcement of
penalties accrued pendente lite, provided that
it also be found that the plaintirf had reason-
able ground to contest them as being contiscatory.
Oklahoma Operating to., p. 338.
In the St. Regis case the problem of penalty accumulation
during appeals was also raised, but the Supreme Court did not
rule on it directly. The paper company had failed to ask for
a stay of penalty cumulation until it brought the case to the
Supreme Court. The court stayed accumulation during its hearing
of the merits. Thus, it recognized a right of courts to stay
accumulation but it failed to state the reasons for so
doing. . Moreover, it refused to strike the penalties
that accumulated during the proceedings before the district
and appeal court. The reason given for failing to strike
-------
171
those penalties was that the paper company had neglected to
ask for a stay at the appropriate time. However, lest
their move be Interpreted as a rule that those who ask for
a stay will get it, the court added in a footnote:
LW]e stayed the accumulation of further penalties
when the petition for writ of certiorari was
granted. If petitioners had unsuccessfully sought
a stay in the District Court, a different question
might have been presented.
Thus, a definitive answer to the question of when it is appro-
priate to stay accumulation of penalties has not been provided
by the Supreme Court.
One lower court has found that a stay of penalty accumulation
is appropriate when the petitioner raises a substantial legal
question. Genuine Parts Co. v. F.T.C.. 445 F 2d 1382 (5th Cir.,
1971). Another court refused to stay accumulation because the
reasonableness of the order being violated had already been
established. Morsheim v. Meinburger, 346 F. Supp. 950 (D.C.D.C.,
1972). The conclusion is that penalties accumulated during
litigation may be stayed but need not always be stayed.
Another issue is raised by lump sum penalties that accrue
when an appeal is taken. Such a penalty — a ten per cent increase
on a damage judgement under a "wrongful death" statute — was
upheld in Louis & Nash. R.R. v. Stewart. 241 U.S. 262. The
court reasoned:
I he first or the other objections is that the
Court of Appeals was not authorized to add ten
-------
172
per cent damages on the amount of the judgment,
as It did. But the Railroad Company obtained a
supersedeas, and the law of the State makes ten
per cent the cost of it to all persons if the
Judgment is affirmed. There was no obligation
upon the State to provide for a suspension of the
Judgment and nothing to prevent its making it
costly in cases where ultimately the judgment
is upheld. So the State may allow interest upon
a Judgment from the time when it is rendered, if
it provides appellate proceedings and the Judg-
ment is affirmed, as but for such proceedings
interest would run as of course until the judg-
ment was paid. Louis & Nasn R.R., p. 263.
Of course, DEP's proposed penalties are, in fact, an interest
charge on compliance that is due the State but denied because
of litigative delay.
Similarly, interest is allowed to run on underpayments of
federal income tax. The court upheld charges even though they
increase the amount a tax payer must pay because of litigative
delay. United States v. ChiIds. 266 U.S. 304 (1924). The court
stated that "a penalty is a means of punishment; interest a means
of compensation." Their reasoning is instructive:
The imposition of a tax is certainly a function of
government and creates an obligation, and the power
that creates the obligation can assign the measure
ot its delinquency -- the detriment of delay in pay-
ment; and 14(a) has done so in this case, and
explicitly done so. Five per centum penalty is the
cost of delinquency, and interest upon the amount due
at 1% per month -- V
-------
173
B. Connecticut Law.
The Connecticut courts apparently have never been asked to
address the question of penalties for litigative delay. The general
statement of the Connecticut law on the reasonableness of penalties
is given fn Walsh, v. Gurman, 132 Conn. 58, 42 A 2d 362 (1945). In
the Walsh case a penalty of $50 was imposed for each of seven rent
overcharges of $3 under the Emergency Prices Control Act. The
landlord pleaded that a penalty of $350 was unreasonable when his
benefit had been $21. The court rejected the argument stating:
In determining whether such penalties are so severe,
oppressive, and unreasonable as to violate the due
process clause, they should be tested not by com-
parison with the overcharges in particular instances
but by the public inerest in having the prices uni-
formly adhered to, and the relation of the penalties
to that object.
Walsh., p. 365.
Interest during appeal on unpaid State taxes is authorized by
C.G.fi. 12-35 and has been upheld by the State's courts. See, for
exairiple, City of Hartford v. Hill, 72 Conn. 599, 45 A 433 (1900)
and 'H.E. Vernan Co. v. lown of Stamford. 108 Conn. 47, 142 A 578
(.T928). Interest oin judgements pending appeal is permitted by
C Ja.S. 52-349 and has been upheld by the State's courts. See, for
fi-xample, Clime v. Gregor, 145 Conn. 74, 138 A 2d 794 (1958). "Unless
fa verdict is set aside, judgement is entered as a matter of course
and interest runs from the date of the verdict." Interest on
workman's compensation during agency appeal is authorized by
-------
174
31-300 and has been upheld by the courts. Balkus v. Terry Steam
Turbine Company, fS. Crt. Conn. Law Journal, August 27, 1974, p.
17, 19/4).
C. Conclusion.
In the absence of any dtrect precedent in Connecticut regarding
the constitutionality of penalties for litigative delay, the federal
precedents provide ample favorable support for DEP's proposed
penalties.
-------
175
DUE PROCESS AND THE ASSESSMENT PERIOD
This memo details additional research concerning due
process constraints on the accumulation of penalties during
the period from notice to final order and during the course of
litigation.
The main concern of the courts appears to be that the defend-
ant not be inhibited in raising substantial legal questions. With
regard to pre-final order accrual, the Supreme Court has asserted
that it would stay accumulation when the prospect of final amounts
appears "ruinous." And the F.T.C. has a statutory requirement
forbidding any accrual until a final order is issued. With re-
spect to litigative accrual, some Supreme Court cases and the
practice of the IRS suggest that a cumulative penalty may be
declared invalid if its running is not limited by either a
specific time period or some other restraint.
Recent cases such as Sniadach raise the question of whether
an initial administrative hearing may not be required before a
notice of violation (which might affect ability to borrow money)
can be issued. However, since the Sniadach series of cases re-
ferred to the garnishment of "necessary"Ttems (wages, savings
accounts, essential furniture), it is doubtful that extension
to the environmental enforcement area will be made.
While due process constraints can be found in many out-
wardly similar situations, two features of the civil assessment
system distinguish it from prior cases and are likely to render
it immune from due process challenge:
(1) The availability of the declaratory judgment pro-
cess; and
(2) The fact that assessments are directly related to
economic benefit, so that in reality, a source does
not "suffer" at all from assessment accumulation.
-------
SUGGESTION COMMITTEE SAY: Improve Your Own Condition; Earn Cash and Recognition; Send in o SuggeVtjenl
i. I O
l_l~ _ J^v___A__ _i L4«.. -__,. SAVE TIME: Handwritten messages art acceptable.
Interdepartme nt Message i/M «,*» #,0, r«//, w- «*,. i/ <»««*», *-»/*»«»«.
STO--201 REV. 3/73 STATE or CONNECTICUT
To
From
NAME
Glenn Gross
AGENCY
NAME
Connie Luyster
AGENCY
TITLE
DATE
Sept. 18, 1974
ADDRESS
TITLE
TELEPHONE
ADDRESS
SUBJECT
DUE PROCESS LIMITATIONS ON THE ACCRUAL OF THE CUMULATIVE CIVIL PENALTY
--I. Whether due process requires the tolling of a cumulative penalty
where a defendant appeals a final order of the commissioner.
The due process requirement implicit in the morass of case law on
cumulative penalties is that a litigant not be barred from raising sub-
stantial legal questions in the appeal of administrative determinations
because of the risk of ruinous penalties which may accumulate during the
-course of litigation. This requirement gains stark expression in the
holding of Ex'Parte Young 209 U.S. 123 (1907) which held unconstitutional
on .its face a state statute which required a litigant to risk enormous .. ..„
fines and possible imprisonment in order to test the validity of the statute.
A more flexible application of the same due process requirement may be found
in Wadley Southern Railway v. Georgia 235 U.S. 651 (/
-------
177
penalized. But both WacMey and the Pacific Coast case imply that there
comes a time when the validity of a statute would no longer be a substantial
issue and that a cumulative penalty may be imposed for failure to comply
with an administrative order. The Pacific Conference case and another case
also involving cumulative penalties Genuine Parts v. F.T.C., 445 F.2d 1382
(1971), make the determination of whether or not to invoke the tolling prin-
ciple a matter for the discretion of the court. The court in Pacific Con-
ference case would toll the penalty where the appeal raises a substantial
question but not where the appeal is frivolous. Genuine Parts finds the
test to be whether the appeal is brought in good faith, but both uphold the
ability of the court to penalize litigation which is dilatory and calculated
to secure benefits other than a full and fair determination of substantial
legal issues.
The cumulative penalties held unconstitutional in Ex Parte Young can be
distinguished from the civil penalty of the Enforcement Act because violation
of the statutes enumerated in the act is not a misdemeanor and will not subject
the violator to a term in prison. Nor is the civil penalty enormous or
ruinous; rather it is calculated to eliminate any economic incentive for dilar
tory litigation. Thus it is unlikely that the civil penalty provision would be
held unconstitutional on its face. On the other hand, due process appears to
require that violators have opportunity to test the validity of the regulations.
Thus the courts will probably permit tolling of the penalty except in notable
instances of bad faith.
There is a Supreme Court case, St. Louis, Iron Mountain Railway and Co.
v. Paul, 173 U.S. 404 (1898) concerning an Arkansas statute which requires
railroad companies to pay back wages to discharged employees where cumulative
penalties were held constitutional. The cumulation of penalties occurred on
a per diem basis, each day's penalty being equal to the company's liability
under the rate of the discharged employee's contract, but the cumulation
-------
178
normally ended in sixty days unless the employee initiated a legal action.
Tn this case the penalty continued until it was merged in the judgment or
unless the company offered to pay the wages due. The cumulation of penalties
was considered to result from the company's own failure to perform a duty.
The court below reasoned that
The act...does not arbitrarily impose a penalty, but
it enjoins a duty, and imposes a penalty, for failure
to discharge the duty. It was enacted by the legislature
in the exercise of the power to regulate railroad com-
panies for the advancement of the interest of the public
and for the protection of their enployees against the un-
necessary withholding of their earnings, and consequent
injuries. St. Louis, I.M. & S.R. Co. v. Paul
64 Ark. 83, 40 S.W. 705(1897).
The Supreme Court upheld the statute, finding that it neither impaired
the right to contract nor violated the "ourteenth mendment. (See additional
cases upholding cumulative penalties 36 Am Jur 2d at 646).
The cumulative penalty in St. Louis resembles the cumulative penalties
provided in the Internal Revenue Code in that the penalties may only run for
a stated length of time. This similarity may be explained by the rule cited
in Beckler Produce Co. v. American R. Exp. Co. 156 Ark. 296, 246, SW1 that if
cumulative penalties run only for a stated length of time where suit is not
brought, such factor prevents them from becoming excessive and unreasonable.
At any rate, the St. Louis case and IRS practice suggest that where a cumulative
penalty is imposed it may be considered invalid if its running is not limited
by a time period or some other constraint.
See e.g. sec 6651. The penalty for failure to file a tax return or to
pay tax is 5% of the amount for each month but not to exceed 25% of the tax.
-------
179
II. What guidelines do the cases provide with respect to the application
of a cumulative penalty during the period from notice to the final
order of the commissioner.
The cases provide little guidance. Due process requires that any pro-
cedure offered protection for the substantial rights of the litigants, but its
requirements are "not technical, nor is any particular form of procedure
necessary" Mitchell v. Grant 94 S. Ct. 1895, 1901 (1971), Inland Empire
Council v. Hills 235 U.S. 697, 710 (1945),
The primary concern of the courts has been whether the civil penalty may
inhibit the defendant in raising substantial legal questions. The dicta in
U.S. v. Morton Salt 338 U.S. 632 (1950) suggests that the cumulative civil
penalty presents few due process concerns which may not be corrected by an
appeal to equity. There as in St. Regis Paper Co.. v. U.S., 368 U.S. 208
(1961) the court sustained the accumulation of a civil penalty for failure
to provide information to the F.T.C. after the commission had issued a final
order. The court said that if the government had delayed suit for the penalty
while ruinous penalties accumulated the courts would not be powerless to
provide a remedy.
We are not prepared to say that courts would be powerless
to act where such orders appear suspect and ruinous penal-
ties would be sustained pending a good faith test of their
validity.
U.S. V. Morton Salt 338 U.S. 632, 654 (1950).
The FTC procedure which is statutory provides clear protection for the
right of the litigant to appeal. Under this procedure penalties for violation
of the statutes cannot accrue until a final order is issued and a final order
cannot issue until the period for initiating an appeal has run or has been
otherwise terminated. Although additional penalties may be imposed for failure
to comply with the final order where an additional penalty is imposed the defen-
dant has time to apply for a declaratory judgment as to the validity of the
additional penalty before it begins to accrue. See Genuine Parts, supra.
-------
180
The fundamental question is whether DEP must defer to the due process
requirement to the extent of the F.T.C. procedure and that question is not
answered by the cases.
In the situation where the penalty accrued in every case from the date
of notice of violation the right to raise substantial questions as to the
validity of the statute would be penalized. The question of whether oppor-
tunity to obtain a declaratory judgment from the courts on questions of law
would satisfy due process is not resolved by any of the cases examined here.
Also it is not clear that the declaratory judgment is available before admin-
istrative remedies are exhausted.If Connecticut requires exhaustion of ad-
minsitrative remedies before appeal to the courts,accrual from the date of
notice would probably penalize the defendant unduly. On the other hand,
if the Commissioner was given discretion to stay the penalty in cases where
the legal issues presented are substantial, he could more readily be perceived
as acting arbitrarily and the number of appeals would probably increase.
-------
181
III. Whether the due process requirements of Sm'adach, Household Finance
and Fuentes limit the imposition of the civil penalty where there
are violations of statutes and regulations which protect the environ-
ment.
Sm'adach v. Family Finance Corp. of Bay View 395 U.S. 337 (1967) and
Lynch v. Household Finance 405 U.S. 538 (1972) found an unconstitutional vio-
lation of due process in garnishment procedures whereby a creditor could garnish
wages and savings accounts merely by serving notice on the wage earner without
providing the garnishee opportunity to present his defenses. Fuentes v. Sheven
407 U. S. 67 ) (1972)found a similar violation of due process in a replevin pro-
cedure where goods sold on an installment plan could be recovered in a similar
ex parte proceeding which also deprived the buyer of an opportunity to present
his defenses. These cases raise the question whether Connecticut courts might
-find that due process requires that an administrative hearing precede any
determination by the Commissioner which results in the placement of a notice
in the land records. While such notice does not affect title to land, it
might affect the ability of the land owner to borrow money since it gives
notice of his potential liability for a large money judgment. The similarity
of the garnishment and replevin procedure with this notice requirement is slight.
Garnishment and replevin procedures deprives an individual of the use or posses-
sion of property in which he has a present interest while the notice in the
land records affects potential rights only. Furthermore, a recent supreme
court decision Mitchell v. Grant, qu S. Ct. 1875 (1974) affirmed validity of
the statutory process of sequestration which was an exparte proceeding
similar to replevin which required a bond to indemnify the buyer and an
affadavit asserting vendor's lien. In affirming the Louisiana statute the
court explained that in its view, the statutory process accomodated the con-
flicting interests of the parties (at 1900), and emphasized that the requirements
of due process vary so long as the substantial rights of the parties are pro-
-------
182
tected (see numerous citations at 1901). Thus Mitchell appears to mark the
outer limit of the recent line of case tending to invalidate ex parte pro-
ceedings affecting property rights. Fuente's, Household Finance and Sniadach
may be distinguished also on the basis of the fact that the property garnished, or
subject to replevi^consisted of necessary items -- wages, savings accounts,
and essential items of household furniture.
-------
184
THE WARNING LETTER
This memo examines two related procedural questions. The
first is if and for how long the Department can delay issuing
a notice of violation after it has reason to believe that a
violation has occurred. The second is whether the Department
can establish a procedure (the warning letter) not specifically
mentioned in the statute.
Under a "plain meaning" interpretation of §2((d) of the
Enforcement Act, which employs the auxiliary verb "may", the
timing of the notice of violation is within the full discretion
of the Commissioner. Although "may" is sometimes construed to
mean "shall", in Connecticut this is done only when such a
construction is deemed necessary for preserving public or third
party rights. The delay option for the Commissioner interferes
with no right; it preserves the regulatee's personal notice and
it enables the Commissioner to preserve his option to select the
most appropriate enforcement device.
Although there is no express statutory provision for the
warning letter device, it is within the Commissioner's authority.
Connecticut administrative law provides great discretion to an
agency to implement a remedial statute in any way necessary for
carrying out the purposes and objectives of the statute. More-
over, it is within the express authority granted to the Commissioner
to promulgate procedural regulations necessary to carry out his
duties and responsibilities.
-------
185
II. E. PROCEDURAL PROVISIONS
1. WARNING LETTER
TO: CPEP Staff DATE: November 8, 1974
FROM: Phil Reed SUBJECT: Analysis of WARNING LETTER
PROVISION
The Civil Penalties Regulations for Emission Violations include
a number of procedural steps that are not expressly authorized by
the statute. One of these provisions is in §22a-6b-602(g)(4) which
requires the Commissioner to send a violator a warning letter on
discovery of the violation. Another is in S22a-6b-602(f) which allows
a hearing officer to delay issuing all or part of a final civil pen-
alty order until accurate cost of compliance information is available.
This memo examines the warning letter provision; the memo following
addresses hearing deferral.
§ 22a-6b-602 (g)' (4) of the proposed civil penalty regulations
p rovi de s th at:
If the Commissioner has reason to believe that an emissions
violation has occurred, he shall send the responsible
regulatee a warning letter by certified mail or by
personal delivery. The letter shall notify the regulatee
of such reason to believe a violation has occurred, and that
the regulatee may be liable for the assessment of civil
penalties under this section unless it takes prompt and
effective action to come into compliance.
This warning letter supplements the notice provision of the Act
(Section 2(d)) which states that:
If the Commissioner has reason to believe that a violation
has occurred for which a civil penalty is authorized by
this section, he may send to the violator, by certified mail,
return receipt requested, or personal service, a notice
which shall include:
-------
186
(1) A reference to the sections of the statute,
regulation, order or permit involved;
(2) A short and plain statement of the matters
asserted or charged;
(3) A statement of the amount of the civil penalty
or penalties to be imposed upon finding after
hearing that a violation has occurred or upon a
default; and
(4) A statement of the party's right to a hearing.
A Notice of Violation provision identical to the statute's .was
promulgated as §22a-6b-101(a) of the General Provisions of the Civil
Penalties Regulations, and applies to all cases. Thus, the warning
is a supplementary procedural provision which the Commissioner has
proposed to provide additional notice to sources which may be
subject to civil penalties.
A warning letter•provision differs from the notice of violation
provision in two respects.* On discovering an emission violation
the Commissioner "may send" a notice of violation, but "shall send"
a warning letter. In addition, the notice of violation is the first
step in the imposition of a civil penalty, while the warning letter
is merely a sign of potential use of the penalty device. Thus the
notice of violation will not necessarily be issued immediately upon
detection or to all violators. However, all violators will receive
notice of their potential liability for civil penalties from the
warning letter. When, and if, civil penalties proceedings are
instituted, they will receive notice of that in a notice of violation.
The warning letter provision calls attention to two issues. The
first is if and for how long the commissioner can hold back a notice
of violation after having reason to believe a violation has occurred
for which a civil penalty can be assessed. This involves questions
of statutory construction and administrative law.
* The two notice instruments vary somewhat in content, but these
differences are not important here.
-------
187
The second issue is whether the Commissioner can establish a pro-
cedure (the warning letter) not specifically mentioned in the
statute. This raises questions of administrative law.
Discretion to Defer Issuance of Notice of Violation
Under a "plain meaning" interpretation of § 2(d) of Public
Action 73-665 the Commissioner would have discretion to issue a
notice of violation at any time at which he has reason to believe a
violation has occurred for which a civil penalty is authorized. The
basic meaning of "may" is to have permission to or to have liberty
to (see, Webster's New Collegiate Dictionary/ 1973 edition/ p. 711).
It does not mean to have an obligation to. See McCarthy v. Thames
Dyeing and Bleaching Co., 130 Conn. 652(1944); Stolman v. Boston
Furniture Co./ 120 Conn. 235 (1935); Goodchild and Partner, Ltd. V.
Ready Tool Co., 100 Conn. 378(1924); Rub in v. Lips on, 96 Conn. 281
(1921); Murdoch v. Murdoch/ 81 Conn. 681(1909); State v. ConIon,
65 Conn. 478(1895). There are even cases in which "shall" was held
to mean "may". See e.g. Hopkins v. Hamden Board of Education/
29 Conn. Sup. 397 (1971). Under this interpretation the Commissioner
could/ but would not have to/ issue a notice of violation as soon as
he has reason to believe a violation has taken place for which civil
penalty liability may lie. So long as he has grounds for believing
such a violation happened and is not barred from starting a civil
penalty action by any statute of limitations he could issue a notice
of violation at any time he chose. The Commissioner is not/ therefore,
barred from issuing a warning letter or other informal notice prior to
issuing a statutory Notice of Violation.
-------
188
The question is not this simple/ however, because the word
"may" is often not given its "plain meaning" in interpretations of
statutory provisions. There are numerous cases in which "may" has
been held to mean "musf'or "shall." see West Realty Co. v. Ennis,
147 Conn. 602(1960); State v. Palmieri, 143 Conn. 569(1956);
Walling v. Rebertine, 134 Conn. 659(1948)? State ex rel Markley v.
Bartlett, 130 Conn. 88(1944); LaGarda, Inc. v. LeWitt, 126 Conn.
588(1940); State ex rel Foote v. Bartholomew, 103 Conn. 607(1925);
Capobinco v. Samorak, 102 Conn. 310(1925); Burnap v. Water
Commissioners, 94 Conn. 286(1920); State v. Richards,
74 Conn. 57(1901); Lyon v. Rice, 41 Conn. 245(1874).
This is such a common interpretation that the dictionary
even takes it into account. "May" is said to mean "shall"
or "must" in law where the sense, purpose or policy requires
this interpretation (Webster's New Collegiate Dictionary,
1973 edition, p. 711). This is not such a common use
of "may" in statutes that the courts treat it as its
plain meaning. In each of the above cases the court
spelled out specific reasons why the permissive interpre-
tation of "may" was not appropriate in the statute involved.
No such reasons exist here, however ; to the contraty, proper reasons
exist for conferring discretion to the Commissioner not to have to
issue Notices of Violation in all cases, viz., management of state
enforcement resources, design and implementation of effective
enforcement policy, and fairness to sources subject to civil
penalty liability.
The Connecticut Supreme Court has set out two broad standards
-------
189
for interpreting the word "may" as "shall," but has also looked
to specific characteristics of the act in question. These factors
are discussed and applied to Public Act 73-665 in the following
paragraphs.
The first standard was set out in State v. Conlon, supra,
at 487 in which the court held that "may" did not mean
"shall." In that case the court said:
It would be our duty to construe 'may1 as
'shall1 if necessary to give effect to an
Act, and the context would permit that con-
struction.
See also, LaGarda Co./ Inc. v. LeWitt , supra, at 590-1
and Walling v. Robertine, supra, in which the court applied
the same standard but came to the opposite conclusion.
The Conlon case involved a statute that stated that
the mayor of a certain city "may issue" licenses to
persons he deems proper to carry on specified businesses.
The court held that to interpret "may" to mean "must"
would not give effect to the Act in that it would deprive
the mayor of discretion the act clearly intended him
to have because of the language about licensing "proper
persons." The statutes in LaGarda and Walling provided
that appeals and writs, respectively, from several lower
courts "may" be taken to a specified higher court. The
Connecticut Supreme Court held that "may" was discretionary
in one sense and mandatory in another. Appeals and writs
could only be taken to the court named in the statute;
-------
190
but they did not have to be taken in every case (a result
the courts said would have been indicated if the word
"shall" had been used). In effect the court in all these
cases looked to the intent of the statute, the effect of
interpreting "may" in each of the alternative senses and
chose the one that gave the most reasonable result.
The second standard for construing "may" to mean "shall" was
well stated in Capobinco v. Samorak , supra, at p. 313;
The word 'may1 in a statute, will be construed
to mean 'shall' whenever the rights of the
public or if third persons depend upon the
exercise of the power or the performance of the
duty to which it refers. (quoting from
Brokaw v. Commissioner of Highways, 130 111.
482,490, 22 NE 596.)
This statement was repeated in State ex rel Foote v.
Bartholomew, supra/ at p. 612, and State ex rel Markley v.
Bartlett, supra, at p. 93. In addition the Court relied
on it without spelling it out in a number of other cases,
including Lyon v. Rice, supra. State v. Richards, supra,
State v. Palmieri, supra, and Burnap v. Water Commissioners,
supra. In Capobinco the statute provided that a court
"may" order a new attachment bond in certain circumstances
and "may" if the order were disobeyed, render ^ default
judgement for the plaintiff. The court held that this
gave the plaintiff a right to a default judgement if the
conditions of the statute were met and thus required a
mandatory interpretation of "may." The statute in
Foote stated that the board of tax relief "may" place
property omitted by the assessor on the tax list. The
-------
191
court held that this was a mandate, not permission, because
the question of the taxability of the property was a question
of law and the public interest required enforcement of the
law. In the Markley case the statute stated that a medical
examining board "may accept" licenses issued in other states
if specified conditions were met. The court held that the
board "must" accept the licenses if the conditions were met,
because the rights of specified individuals to practice
their chosen profession were involved. The statute
in Lyon provided that special town meetings "may be convened
when the selectmen shall deem it necessary, or on
application of twenty inhabitants qualified to vote in
town meetings/" at 248. The court held that the selectmen
were required to hold the meetings upon proper application.
Any other meaning would render the second phrase of the
statutory directive redundant. It stated at p.248 that
the "statute established a right to have a town meeting
upon appropriate request and therefore a duty in the
selectmen to hold it." In the Richards case a city
charter stated that the common council "may limit" the
time in which individual property owners could comply
with regulations concerning proper sidewalks, etc. The
court held that the council had to state such limits,
because the certain time limits triggered criminal pro-
secutions for failure to satisfy the sidewalk standards.
In Palmieri the statute stated that after leaving office
a municipal court judge may finish up matters begun
-------
re going out of. office. The court Interpreted this
claty, because any otheir result could jeopardize
. ';' I'.'- fL~i.es in such matters to full legal process,
'';n^y appoint'" a r>upt":r ' n tender r. of we fcer
-j T',ic':5VjC'c,> " J'ticit o c r "i i r" >-.u"J .IT 1.1*1?"' f-~ Iff ice .
"--:,;;•''• mcrjr^ "shrij.i" b--: r- ->;??^ it vas in
T-'"i the "TI
--,:• -My-.-f •>-)'<:*'.-•:*. -,-r -.^o ar-rnen that
i: tt'-jnl: of t^i- J,?c"Ti-;-la; ure „ Stolinari
-------
193
of sufficient cause, place a corporation in receivership
or dissolve it. The Connecticut Supreme Court said that
the provision gave the court discretion to establish a
receivership or dissolve the corporation because of the
use of "may" combined with the requirements of a finding
of "sufficient cause." As was true in Conlon, the court
looked to additional language of discretion in interpreting
"may." Such language is not a prerequisite of such a finding,
however. In Murdoch the court interpreted a statute
under which any court of probate may modify or revoke any
order or decree it issued ex parte at certain times or on
application by an interested party. Without much discussion
the court held that the provision gave the court dis-
cretion to modify or revoke. In McCarthy the court
interpreted a statement which stated that where a party
fails to comply with a rule or order of the court as to
pleadings, the court "may" grant a nonsuit. The court
held that "may" indicated discretion, because a mandatory
reading would go against sound principles of procedure.
In Rubin the statute involved venue and used "may."
The court construed "may" as a permissive, not limiting,
word. An important element in its decision was the fact
that the section of the statute under consideration used
both "may" and "shall," which suggested an intention to
give them different meanings. In addition, the court
noted that a "shall" construction would have been un-
-------
194
reasonable since it would deprive persons from one county
of a choice of venue available to residents of all other
counties in the state. In Goodchild the court relied
on the history of the statutory language. The statute
stated that a court may reject depositions written by
certain interested persons. The court decided that this
indicated discretion because a previous version of the
same provision had used the word "shall." Thus the
court will look to other language in the same or related
sections of the statute, and in past versions, as well
as to the reasonableness of the result in terms of the
statutory purpose and the impact on affected individuals
and the public in interpreting provisions using the word "may ",
Application of the above principles and decisions to
section 2(d) of Public Act 73-665 leads to the conclusion
that the General Assembly intended to give the Commissioner
discretion concerning the timing of the issuance of a
notice of violation. The context of the provision does
not require a "shall" interpretation and such an inter-
pretation is not necessary to give effect to the act.
In fact, in applying this standard it is clear that a
permissive interpretation is needed. Such a construction
of the provision does not interfere with the rights of the
public or of individuals. Finally, other statutory
language indicates a legislative intent to give the
Commissioner discretion. These points are elaborated below.
-------
195
The Conlon standard draws attention to the context
of the statutory provision in question. When viewed in
context it is clear that section 2(d) was intended to
invest the Commissioner with discretion. The statute
sets out seven criteria, including "the amount of the
assessment necessary to insure immediate and continued
compliance(Section 2(c)(l) ) which the commissioner can
consider in setting a civil penalty (Section 2(c) ). It
is reasonable to assume that the legislature intended
him to have the discretion to delay issuing a notice until
he had sufficient information to consider those of the
criteria which he deemed most relevant. It would be
difficult to determine what penalty would meet the
criterion of § 2(c)(1) without knowing the cost of compliance
and therefore the economic benefit of noncompliance. Since
in some cases cost of compliance data could be unavailable for
a period after discovery of the violation, mandating the
Commissioner to issue a Notice of Violation immediately after
detecting a violation could frustrate the express obligation of
the Commissioner to determine the amount necessary to achieve
compliance when issuing a Notice of Violation. Similar arguments
could be made about other criteria in Section 2(c).
The Conlon standard also raises the issue of the basic statutory
purpose. The civil penalties established by Public Act 73-665
were intended to supplement the existing enforcement tools of the
Department of Environmental Protection and not to be used in every case
-------
196
For instance, in the Senate debate on the bill Senator
Costello, one of its sponsors,observed:
Technical amendments are included which will
allow the Commissioner's (sic) discretion in
issuing orders to abate pollution or requesting
assistance from the Attorney General.
Some of the technical amendments referred to are included
in sections 8 through 13 of the act. They change the
language of other enforcement provisions so that the
Commissioner "may" rather than "shall" resort to them when
the requisite conditions occur.
Goodchild and Partners, Ltd, v. Ready Tool Co. established
that this sort of amendment indicates an intent to change the
interpretation of the word. The fact that section 2(d) reads
"may" and the same piece of legislation amended similar pro-
visions relating to other enforcement devices to read "may" instead
of "shall" is an unequivocal expression of legislative intent
as to the meaning of "may." Moreover, other parts of section 2
(enforcement act) employ the word "shall" (see section 2 (c) and
2(i) ). As Rubin v. Lipson, supra, established this is strong
evidence of a legislative intent that "may" does not mean "shall."
Thus, section 2(d) clearly gives the commissioner discretion in the
timing of sending notices of violation.* The Murdoch and McCarthy
cases indicate that when applied to areas of established discretion
"may" will be given a discretionary interpretation.
*This result is in accord with general principles of administrative law.
Agencies generally have broad discretion in employing their enforcement tools;
an analogous situation to prosecutional discretion in criminal matters (see
Davis, Administrative Law Treatise, 1970 Supplement, Section 200.4, pp. 50-
52.)
-------
197
Furthermore/ section 2(i) of the act specifically states
that:
The provisions of this act are in addition to
and in no way derogate from any other enforce-
ment provisions contained in any statute
administered by the Commissioner. The powers,
duties and remedies provided in such other
statutes, and the existence of or exercise
of any powers, duties or remedies hereunder
or thereunder shall not prevent the Commissioner
from exercising any other powers, duties or
remedies provided herein, therein, at law or
at equity. Section 2(i).
It is clear from this provision that the civil penalty
is to be used in a way that will not weaken the Commissioner's
other enforcement tools. However, if he did not have discretion
to delay imposition of the penalties it would detract from his
ability to use other enforcement devices. If he did not have
discretion not to issue Notices of Violation in every case, he
would be barred from using other remedies entirely. See § 1,
Public Act 73-665. This is not what the legislature intended, and
it has said so in express language. The interpretation of
section 2(d) that gives the commissioner discretion thus conforms
to the ConIon standard.
This interpretation also conforms to the Capobinco
standard. It does not infringe rights created by the
statute in individuals or the public. The individual
regulatee's right to notice of his liability for penalties
is preserved. The notice of violation must still be
given before the penalties can be imposed. This is clearly
different from the case in State v. Richards, supra,
where the notice of a time limit was essential for a
-------
198
property owner to know when he would become liable for
criminal penalties. Furthermore there are no rights of
individuals to practice their professions involved here
as was the case in State ex rel Foote v. Bartholomew, supra
and State ex rel Markley v. Bartlett, supra. Since the
penalty for past delay cannot be involved for this period
unless the regulatee had actual knowledge of his obligation
to come into compliance with environmental standards
(see Section 22a-6b-602(g)(4)) there is no interference
with individual rights. Nor is there interference with public
interests. The public has an important interest in the
enforcement of environmental laws. This interpretation of
Section 2(d) does not interfere with that interest. It
enables the Commissioner, who is charged with enforcement of
those laws, to choose the enforcement tool that will be
most effective in a given situation. (Contrast Burnap v.
Water Commissioners, suprafr. Thus the discretion reading
of section 2(d) does not violate the standard set out
in Capobinco.*
Authority to Prescribe Warning Letter by Regulation
Since it has been shown that the Commissioner has
discretion to delay issuing a notice of violation, the
next issue is whether he has authority to adopt the warning
letter provision of the proposed regulations. There is no
statutory prohibition against this or any other procedural
provision. On the other hand, there is no
* Even if it did, the fact that it is necessary to give
effect to the act (Conlon) might well cause a court to approve it.
None of the above cases discussed such a conflict.
-------
199
express authority for the warning letter provision. The Commissioner does
have the broad authority to adopt such regulations necessary to carry out his
statutory duties and responsibilities. (Section 3 of Public Act 73-665.1 The
question then is whether the Commissioner has the power, based on his
express, broad rule-making power and his implied and incidental power,to
establish procedural steps such as the warning letter provision in regulations.
The basic principles governing rule-making discretion have been dis-
cussed in the section concerning statutory interpretation. A brief
summary of these principles reveals that an administrative body
can exercise only the powers which are
expressly granted to it by statute or
such as are necessary to enable it to
discharge the duties and carry out the
objectives and purposes of its
creation.
Aunt Hack Ridge Estates, Inc. v. Planning Commission, 160 Conn. 109,
115 (1970). Regulations must be promulgated "by virtue of express
provisions of law" or "such as are by fair implication and intendment
incidental to and included in authority expressly conferred." John
J. McCarthy v. Alsop. 122 Conn. 288 (1937). Here, the authority
to adopt procedural regulations is expressly conferred by statute,
§ 22a-6, C.G.S. Moreover, the warning letter is necessary to
enable the Commissioner to discharge his duties and carry out the
purposes and the objectives of the Enforcement Act.
As regards individual cases, the statutory purposes and objectives are
stated in Section 2(c), viz.,to consider the factors prescribed therein in
assessing civil penalties. As indicated earlier, the information necessary to
determine the proposed penalty to be prescribed in a Notice of Violation may not
be available at the time of detection. The warning letter thus provides time
for the Commissioner to continue his investigation while providing notice to
the source of possible liability. It is necessary to enable the Commissioner to
-------
200
determine preliminarily the amount required to insure compliance for purposes
of issuing a Notice of Violation.
While courts scrutinize challenged regulations to determine if they have
an adequate basis in statute, once such basis is found, regulations are overturned
only where there is a significant break with the statute. The warning letter
introduced in the civil penalty regulations is readily distinguishable from
regulatory provisions that have been overturned by Connecticut courts as
deviations from statutory schemes. It is no more than a detail"for regulating
the mode of proceeding to carry into effect the law as it has been enacted,"
which is clearly within the authority of the Commissioner. (24 Opinion of the
Attorney General 175 (Dec. 6, 1945).
In Hartford Electric Light Co. v. Sullivan, 161 Conn. 145 (1971)
a statute provided for tax assessments on certain specified assets. The State
Tax Commissioner had by regulation provided for assessment on a broader class
of assets due to a mistaken interpretation of the statute. The Court held
that the regulations were invalid because they were broader than the statute
authorized and because there was no clear grant of power in the statute for
the Commissioner to go beyond the statute in rule-making. In contrast, the
procedure introduced in the civil penalties regulations would not in any way
broaden the coverage of the program.
In South East Property Owners and Resident's Association v. City
Plan Commission, 156 Conn. 587 (1968), the Commission enacted a regulation
setting a maximum length for a certain type of street in subdivisions. In
another regulation it set up a procedure for granting variances from the other
-------
201
regulations. The court found that the statute did not authorize the Commission
to grant variances and therefore voided the offending regulation. The civil
penalty regulation in question would not increase the power of the agency, as
the variance regulation did in this case.
In Finn v. Planning and Zoning Commission, 156 Conn. 540 (1968), the
statute in question (CGS Section 8-26) required that the Commission act on sub-
mitted plans within 60 days, and made failure to do so operate as approval.
The Commission promulgated regulations setting up a two stage procedure. The
first step called for the submission of an initial plan for preliminary ap-
proval. After approval the applicant had 90 days to submit a final plan on
which the Commission would act within 60 days. The scheme was a clear cut
attempt to draw out the approval process to enable it to do a more thorough
job. The court invalidated the scheme. It first noted that there was no
provision in the relevant statutes (Sections 25,8-26 CGS) giving specific
authority to the Commission to provide for such a procedure. It then noted
that "the whole field of subdivision regulation is peculiarly a creature of leg-
islation," quoting from 2 Yokely, Zoning Law and Practice (3rd Ed.) Section
12-3. The next link in its reasoning was the following argument:
in order to determine whether the regulation in
question was within the authority of the Commission
to enact, we do not search for a statutory prohibi-
tion against such enactment; rather we must search
for statutory authority for the enactment. 156 Conn.
at 545 quoting from Avonside, Inc. v. Zoning and
Planning Commission, 153 Conn. 232, 236 (1965),.
Finally the court noted that the statute provided for a single application to
which the agency was to respond within 60 days. The regulations provided for
an application and a plan submission but the court argued that in fact this
meant two applications and was an unauthorized administrative change in the
statute.
-------
202
The Finn case is of particular relevance to the civil penalty de-
ferral question. There are some parallels between the Finn Commission's
scheme and the warning letter provision. There are also important differences,
however. The delay in the subdivision case can well be costly to the applicant
as it delays the development of his or her land. In the civil penalty case
there is no harm to the violator. Moreover, the guarantee of informal notice
of potential civil penalty liability to the violator from the warning letter
would give the violator an opportunity to avoid harm by rapidly complying with
an abatement order. The applicant had no such option under the Finn procedure,
and the court noted that the 60-day limit was "for the protection of the sub-
divider, " 156 Conn, at 544.
Hammerberg v. Holloway, 131 Conn. 616 (1945), involved regulation of
milk prices. The price was to be determined in part by the butterfat content
of the milk, which was to be determined by a standard test, the steps of which
were set out in the statute. The Commission used a variant of that testing
procedure which significantly raised the possibility of inaccuracy. This
procedure was apparently within the Commission's regulations, but the court
overturned Commission pricing decisions based on the faulty testing. It noted
that the power to promulgate regulations did not empower the Commission to
override the express provisions of the statute. Unlike these modifications,
the civil penalty modifications increase the fairness of procedures to the
regulatee.
The case of Oles v. Liquor Central Commission, 10 Conn. Sup 489
(1942) involved a Commission regulation calling for the certification of all
employees of liquor permittees. This was promulgated pursuant to a statutory
provision prohibiting the employment of persons in liquor-selling establishments
-------
203
who did not meet the standards required of permittees. A certification system
for permittees was in effect and had been upheld. The Oles court overturned the
regulation, holding that the certification of all employees in question was
such an enormous task that the legislature could not have intended that the
Commission undertake it. The warning letter introduced in the civil penalty
regulations would have a much smaller impact on the agency's costs.
Conclusion
In summary,the warning letter provision is within the express authority
of the Commissioner to adopt procedural regulations necessary to carry out his
duties and responsibilities. It is also necessary to avoid frustrating the
administration of Section 2(c) of the Act, and is consistent with his discretion
to delay issuance of Notices of Violation or to use alternative enforcement
tools. Finally, it is consistent with the case law in Connecticut setting forth
the limits of discretion in adopting regulations to implement statutory mandates.
PR/kk
-------
204
HEARING DEFERRAL AND PARTIAL FINAL ORDER
This memo examines the question of statutory authority and
due process raised by §602(f) of the regulations, which permits
a hearing deferral and the issuance of a partial final order
if information necessary to an accurate determination of the
civil penalty amount is not available at the scheduled time for
the hearing.
It may be argued that the scheme set forth in 602 (f) is
not expressly authorized by §2(d) of the Enforcement Act, which
contemplates a hearing and appeal of the complete notice of viol-
ation. At the same time, however, the agency has substantial
discretion to conduct administrative proceedings in order to
develop a full and complete record and make an informed reasoned
decision. The hearing scheme is itself ancillary to a much
larger plan for the implementation of the Act, and that the
overall plan is a reasonable application of administrative ex-
pertise in pursuing a remedial objective.
With regard to due process, a provision for delay is of
itself highly unlikely to constitute a violation; even the
federal APA calls for a consideration of conveneince and nec-
essity in setting the time for a hearing. If the cost of com-
pliance approach meets with approval, there should be no diffic-
ulty in establishing the necessity for deferral. An egregious
application of the provision in a particular case, however,
might be untenable if it severely inconvenienced the regulatee
for no sufficient administrative purpose.
-------
205
II. E. Procedural Provisions
2. Deferral of Hearing/partial Final Order
MEMORANDUM
TO: CPEP Staff DATE: November 5, 1974
FROM: Andy Weissman SUBJECT: Legal Analysis of Proposed Regulations Section 602(f)
I. Introduction
Section 602 (f) of the proposed regulations provides for a possible deferral
of the statutorily required administrative hearing reviewing a decision to im-
pose a civil penalty, and the issuance of only a partial final order, if "infor-
mation important to an accurate determination of all or part of the civil penalty
amount is not available at the time of the hearing but will become available
later." This memo addresses the problem of whether §602(f) can be adopted as a valid reg-
ulation of the Department. Two basic issues are presented: first, is the pro-
vision for the division of review and the issuance of a partial final order, with
the undecided issues to be tried and acted upon at a later date, acceptable as
a regulatory promulgation under Public Act 73-665; and second, is the resulting
delay in deciding some issues violative of due process standards?
II. Does Section602 (f) Go Beyond Statutory Authority?
The standards for testing the validity of rule-making by administrative
agencies are broad, but ultra vires actions are possible. The scope of rule-
making powers was perhaps best stated in 30 Op. At. Gen. 135 (March 24, 1958):
"A public administrative officer may make or adopt only rules and reg-
ulations which carry into effect the will of the legislature as expressed by the
statute ....
He may not make or adopt a rule or regulation in contravention of, or out
of harmony with, a statute, . . . and he may not, by the adoption of a rule or
regulation, amend, alter, enlarge, or restrict the terms of a legislative en-
actment. He may not, under the guise of regulation, . . . change the purpose
and the effect of the law."
Similar rules have been enunciated by the Connecticut courts. In John J.
McCarthy Co. v. Alsop, 122 Conn. 288 (1937), the Court stated that regulations
-------
206
by the Public Utilities Commission must be promulgated "by virtue of express pro-
visions of law" or they must be rules "such as are by fair implication and in-
tendment incident to and included in authority expressly conferred." In
Loglisci v. Liquor Control Commission/ 123 Conn. 31 (1937), the rule stated
was that "the authority oftdBe administrative body acting under [ a legislative]
grant of power, is limited to the making of reasonable rules and regulations
within the scope of the power granted." See also Aunt Hack Ridge Estates, Inc.
v. Planning Commission, 160 Conn. 109, 115 (1970) (planning commission can ex-
ercise "only the powers granted to it by statute or such as are necessary to
enable it to discharge [its duties f) ; State ex rel. Huntington v. McNulty,
151 Conn. 447, 449 (1964) (no regulatory body can modify the statutory powers
under which it acquires authority without specific legislative action);
Hartford Electric Light Co. v. Sullivan, 161 Conn. 145, 155 (1971); Finn v.
Planning and Zoning Commission, 156 Conn. 540, 546 (1968); Hammenberg v. Holloway,
131 Conn. 616 (1945); Dadiskos v. Liquor Control Commission, 150 Conn. 425
(1963).
The application of these broad standards is difficult to pin down exactly,
but some consistent factors can be gleaned from the cases. Almost every case
which has invalidated a rule or regulation promulgated by a Connecticut ad-
ministrative or regulatory agency has involved a direct conflict with the con-
trolling statute. Thus, in Hartford Electric Light, supra, the statute pro-
vided for tax assessments on specified assets. The Tax Commissioner, however,
provided by regulation for an assessment on a broader class of assets due to
a mistaken interpretation of the statute. In Finn v. Planning and Zoning Com-
mission, supra, the statute required that the Commission act on submitted plans
within 60 days. The Commission attempted through regulations to extend this
period in order to allow it to act with greater information and analysis. The
-------
207
Court invalidated the scheme. In Hammenberg v. Holloway, supra, statutory pro-
visions called for the regulation of milk prices based in part on the butterfat
content of the milk. The statute set out the steps of the test to be used to
determine butterfat content. The use of a different method of measurement by
the State agency was rejected by the Court. See also Oles v. Liquor Control
Commission, 10 Conn. Sup. 489 (1942); State ex rel. Basking v. Bartlett, 13 Conn.
Sup. 463 (1945).
South East Property Owners and Presidents' Association v. City Plan Commi-
ssion, 156 Conn. 587 (1968), might be perceived as an exception to the "direct
conflict" rule, but this would be inaccurate. There, the planning Commission
failed to enforce its own regulation by granting a variance. The controlling
statute was not in direct conflict, but did fail to authorize the grant of any
variance. The Court overruled the variance, stating it was not within the Com-
mission's power to create any exceptions to its regulation. Reliance on South
East as a case rejecting the "direct conflict" rule is mistaken because first,
the relevant regulation permitted the proposed scheme only Under specific con-
ditions that were not met in the instant case, and second, the Connecticut
courts have interpreted planning and zoning statutes extremely narrowly and
sui generis. See Finn v. Planning and Zoning Commission, supra.
The "direct conflict" rule is supported by those cases which uphold rules
and regulations that go beyond the statute, but are not in direct conflict with
it and effectuate its purposes. In John J. McCarthy Co. v. Alsop, 122 Conn.
288 (1936), the Court upheld a regulation requiring carriers to hold insurance
with a Connecticut-based company as a reasonable method of implementing a statute
requiring the Public Utilities Commission to issue common carrier licenses only
to persons who had adequate financial responsibility. In Dadiskos v. Liquor
-------
208
Control Commission, 150 Conn. 425 (1963), the statute set out several grounds
for the revocation of liquor licenses and the regulations prescribed additional
grounds. The Court held that the regulations were valid because the Commission
had a broad grant of powers: it was to promulgate all regulations necessary to
enforce the provision of the act and to ensure proper, safe and orderly conduct
in establishments with liquor permits.
The application of these standards to section 602(f) of the proposed reg-
ulations is not absolutely clear, but the provision is most likely valid. Sec-
tion 2(e) of Public Act 73-665 is addressed to the provision of an administrative
hearing and provides that:
"If a hearing is requested then, after a hearing and upon a finding that a
violation has occurred, the Commissioner may issue a final order assessing a
civil penalty under this section which is not greater than the penalty stated in
the notice.
Section 2(f) relates to judicial appeals and states that:
"The final order of the Commissioner assessing a civil penalty shall be sub-
ject to appeal (in the Superior Court) ."
Section 602(f) of the proposed regulations merely allows for the Commissioner
or hearing officer to delay specific determinations if insufficient information is not
available,.but will later become available. There is no direct conflict with
the statute because an administrative hearing is allowed, and the issue of whether a
violation has occurred is fully litigated as required by the statute, but some
part of the penalty is not reviewed until a later date. Section 2(f) is not in
conflict because the final order is appealable to the Superior Court, to the ex-
tent that it is final. There is, of course, a legitimate argument that the
scheme proposed in section 602(f) is not "in harmony" with the overall intent
of the statute: to provide a hearing and appeal of the complete notice- of
-------
209
violation as it is issued pursuant to Section 2(d) of the Act. The response to
this is that no direct conflict exists, the hearing scheme is ancillary to a
much larger plan for the implementation of the Act, and the overall plan
is..a reasonable application of administrative expertise and discretion.
(See memorandum relating to the cost of compliance as the basis for-civil penalties
regs.) Furthermore, it is the responsibility of the hearing officer to present
a complete and detailed record of findings,and delays needed to develop this
record are rarely overruled. See Sections 12 and 15 of the Connecticut Admin-
istrative Procedure Act re_ the necessary findings of fact to be made by a hearing
officer. See also, generally, Davis, Administrative Law Treatise, §16. 02 and
§8.08.
In sum, the answers are not clear-cut, but the hearing process called for in
Public Act 73-665 is probably adequately implemented by Section 602(f) of the
proposed regulations.
III. Does Section 602(f) Deny Due Process?
A separate issue ifi whether the delay caused by section 602(f) is violatitfe
of due process requirements and the Administrative Procedure Act. Section 12 of
the Connecticut A.P.A. requires a hearing for contested cases, but the delay .ele-
ment is not addressed. There is no reason to believe that the A.P.A. standard and
the due process standard with respect to allowable delay will differ.
In Smith v. Illinois Bell Telephone Co., 270 U.S. 587 (1926), the Supreme
Court decided that administrative delay of two years in a case concerning a pro-
posed rate increase was violative of due process. In American Broadcasting Co. v.
F.C.C., 191 F. 2d 492 (D.C. Cir. 1951), a delay of ten years of a hearing for a
permanent permit for operation after a temporary permit had been granted was re-
-------
210
jected by the Court as a denial of due process. See also F.P.C. v Hunt,
376 U.S. 515 (1964). Compare F.T.C. v J. Weingarten, Inc., 336 F. 2d 687
(5th Cir. 1964), cert. den. 380 U.S. 908 (1965), where the Court found that a
complaint pending before a Hearing Examiner for 2 1/2 years not necessarily un-
reasonably tardy. Generally, however, the hearing officer in an administrative
hearing has discretion to grant or deny continuances with due process being vio-
lated -only in extreme cases, like those above. Certainly a provision for delay,
of itself, is not a due process violation, although an egregious application
of such a provision may be untenable. An examiner's excercise of discretion is
set aside only for gross abuse. See Swift & Co. v. N.L.R.B., 106 F. 2d 87 (10th
Cir. 1939); N.L.R.B. v. Algoma Plywood & veneer Co., 121 F. 2d 602 (7th Cir. 1941),
It is useful and revealing to note that Section 5(a) of the federal A.P.A.
provides that "in fixing the times and places for hearings due regard shall be
had for the convenience and necessity of the parties ..." This includes
the agency party as well as the private party. See Sen. Doc. No. 248, 79th Cong.,
2d Sess., 203 (1946). Thus, it is not violative of due process for the admin-
istrative agency or its representative to seek delay if it does not unreasonably
inconvenience the opponent party and it serves a legitimate regulatory purpose.
The conclusion, then, must be that the provision for delay alone, so long
as it is reasonable in the context of the relative convenience of the parties
and the legitimate administrative scheme and purposes, is not violative of due
process. One should be aware, however, that the due process issue is one chich
is laden with personal judgments and notions of equity, and that a court could
easily decide that the idea of delay at the request of the complainant agency, or
at least for its benefit, while the defendant party remains unable to determine
the extent of its liability, is offensive to its conception of fairness and the
judicial or quasi-judicial process.
-------
211
IV. Conclus ions
The scheme set forth in proposed regulation 602(f) is not without its dif-
ficulties. It definitely alters the familiar conceptions one has, and which the
General Assembly may have had, of a unified and simple hearing and appeal process.
On the other hand, it is part and parcel of a total regulatory scheme that is
clearly within the authority and power of the administrative agency, and does not
directly conflict with any provision in the statute. The balancing process is
difficult, but the issues are so closely balanced that it is acceptable to attempt
to implement §602(f), which eases and reinforces the plan chosen by the Department,
and to leave the legal determination to the courts, where it rightfully belongs.
The due process issue is similar: arguments pro and con are available and
are sensible, but the instant provision is by no means outrageous, is, in fact, like-
ly to be acceptable on its face, and is subject to objections only after actually
applied unfairly. Thus, it is best here as well to leave the determination of
this sensitive and highly judicial issue to the courts.
11/7/74
AW/mp
-------
212
WATER COMPLIANCE: PERMIT LIABILITY
This series of memos addresses the issue of pre-existent
permit liability for sources who commenced discharging waste waters
prior to May 1, 1967.
The FWPCA requires that every source in a participating
state be liable for operating without a permit. With respect
to pre-1967 discharges in Connecticut, however, this liability
is indirect. A pre-1967 source who is polluting or threatens
to do so may be issued an order, upon compliance with which he
may be required to obtain a permit. But until all this occurs,
the source is free from liability for operating without a permit.
Once such a source has been issued a permit, however, and
the permit expires, he may become liable. At this point in the
regulatory process, any reason for differentiating between pre-
and post-1967 discharges has evaporated. Moreover, several
affirmative arguments supporting liability can be advanced:
(1) The nature of a permit is permission to per-
form an act that would otherwise be illegal.
(2) The Connecticut statutes were designed to
conform to the FWPCA, which contemplates
continuing permit liability.
(3) Continuing liability is not an unreasonable
burden for the regulatee, since the system
allows him ample time to institute improve-
ments necessary for conformity with changing
standards.
(4) If the NPDES permit carries with it no liability
for violation (failure to renew is a violation),
it is a meaningless document.
(5) The other Connecticut water pollution statutes
are consistent with this interpretation.
But since this liability is not explicitly mentioned in the state
Clean Water Act, an amendment to the statute is suggested.
-------
SUGGESTION COMMITTEE SAYi Improve Your Own Cendltlan; Eom Co»li and Recognition! S«nd In o Sugpettlont
_. 213
Interdepartmenl Message
STO-201 REV.3/74 STATE or CONNECTICUT
(Stock No. 6938-051-01)
SAVE TIME: Handwritten metttget tre acceptable.
Vie carlo* if you really need * copy. If typewritten, ignore faint linet.
To
From
NAME
Phil Reed
AGENCY
NAME
Fred Dennehy
AGENCY
ADDRESS
TITLE
June 10, 1975
TELEPHONE
ADDRESS
SUBJECT
Preexlstent Permit Liability for Pre-1967 Polluters
Dilatory litigation could emerge as a major problem in the early stages
of CA implementation. The potential consequences of violating an order from
Water Compliance may induce a recalcitrant regulatee to postpone the effective
date of the order through unnecessary hearing requests and unreasonable appeals.
The incidence of such tactical delays is likely to decline if the Department
has the discretion to impose an assessment for a preexistent violation of some
kind. Air Compliance has this discretion with respect to penalties for previous
violations of emissions standards, but since it is not presently illegal to
discharge water in excess of current standards, Water Compliance does not.
An alternative basis for liability may exist, however, if the regulatee has
been operating without a permit. This memo examines that possibility.
Section 25-541 of the General Statutes makes it illegal to "initiate,
create or originate any new discharge" after May 1, 1967 without a permit.
Any post-1967 polluter without a permit is subject to a civil assessment.
A pre-1967 polluter responsible for a continuing or recurring discharge is
nonetheless subject to an abatement order (25-h), one of the conditions
of which may be the procurement of a permit. It is possible, but by no means
certain, that such a person would be liable at any time in the future for
operating without a permit.
There is an argument, albeit tenuous, that even a pre-1967 polluter who
has never come under a departmental order may be subject to liability for
operating without a permit. This argument assumes that Connecticut, by virtue
of its participation in the NPDES program, has been made the agent of the
Federal Government for purposes of enforcing FWPCA throughout the state. If
this is true, then Connecticut is empowered by 40 CFR 124.73 (e)(3) to impose
civil penalties for discharging without a permit, and conceivably, under
40 CFR 124.73 (a)(1), to enforce the national effluent standards in the same
manner.
It is doubtful, however, that the FWPCA contemplates a single permit system
administered uniformly by the several states. While the legislative history
of P.L. 92-500 does not address the issue directly, its language suggests that
a variety of state programs might qualify to issue, modify and revoke the
NPDES permit. "Any State," according to the history, "may create its own
permit system, following Section 304 guidelines. The Administrator shall
approve the State permit program and delegate authority to the State, unless
SAVE TIME: // convenient, bandterite reply to tender on tbil same sheet.
-------
214
the State program fails to have adequate authority to carry out several specified
functions." (p.3736). The "authority" delegated appearsto be control rather
than agency.
It is also stated that "the Committee believes that, after a transition
period during which the State program and capability will be upgraded, the
program should be administered by those States with programs which meet the
requirements of this act." (p.3737, my italics.) And even those portions
of the history which stress conformity allow for a plurality of approaches,
urging uniformity "in as many procedural requirements as possible." (p.3720,
my italics.)
Even if the FWPCA is read to intend a delegation of total agency to the
States, the Connecticut statute must be read the same way if the argument for
preexistent permit liability is to stand. 40 CFR 124.10 says that any state
participating in the NPDES must have "a statute or regulation, enforceable in
the State courts, which prohibits discharges of pollutants by any person, except
as authorized pursuant to an NPDES permit." Arguably, 25-54c(k), which grants
the commissioner the right "to exercise all incidental powers necessary to carry
out the purposes of ... the federal water pollution control act," in conjunction
with the general prohibition against pollution contained in 25-54(f), is
designed to meet that requirement. And since neither 40 CFR 124.10 nor
25-54c(k) is specifically limited, the permit requirement applies to all dis-
charges, post-1967 and pre-1967, whether under orders or not.
It is evident that this interpretation is extremely strained, and there
are several arguments to the contrary. First, the hermeneutic principle of
inclusio unius, exclusio alterius as applied to 25-54i(a) strongly implies
that pre-1967 polluters are not required to obtain a permit; if the obligation
is indeed general, the first sentence is both unnecessary and misleading. Nor
is 25-54c(k), with its grant of "incidental" powers, sufficiently clear to
function as a tacit amendment to 25-54i(a).
Second, the Connecticut Attorney General, in his recitation of authority
for NPDES qualification in May, 1973, plainly ties the issuance of a permit to
a pre-1967 polluter to the prior issuance of an abatement order. The Attorney
General's statement was the major basis for EPA's designation of Connecticut as
a participant in the NPDES program in September, 1973.
Third, Directive 5, Manual Code 3325 of the Department, dated August 3, 1973,
adopts the procedure of discretionary NPDES permit issuance to a pre-1967
polluter upon his compliance with an order. This procedure assumes the lack
of a preexistent obligation. Such a Directive, according to the Attorney
General's statement, could be enforced against the Department.
Finally, it has been the consistent practice of the Department to require
a permit for a pre-1967 discharger only after an order has been issued to
him. To summarily alter this practice without promulgating a regulation
to that effect would subject the Department to the charge of due process
violation.
The primary difficulty in the argument against preexistent permit
liability revolves around 40 CFR 124.10. But it appears that EPA considered
the order-permit procedure sufficient to meet its requirements. If there is an
inconsistency here, it is a Federal one. The argument that Connecticut intended
to impose a preexistent permit liability on pre-1967 polluters is too weak to
stand.
-------
SUGGESTION COMMITTEE SAY» Improve Your Own Condition; Eom Co*h onj Recognition; 5«nJ In o Suggettlonl
luforcJepartmenf Message 215
STO-201 REV.3/74 STATE OF CONNECTICUT
fStock No. 693S-051-Oi)
SUBJECT
SAVE TIME: HanJufrinea mfjtagft „,
Vie carbon if you really need a copy. If typewritten, ignore faint lines.
To
F?OK1
NAME
Phil Reed
AGENCY
NAME
Fred Dennehy
AGENCY
ADDRESS '
June 16, 1975
ADDRESS
FURTHER QUESTIONS REGARDING LIABILITY OF PRE-1967 POLLUTERS
I. As reported in a previous memo, it appears that there is no preexistent liability
for a pre-1967 polluter who has not come under an order and who is discharging without
a permit. The situation may be different, however, for a pre-1967 polluter who has
come under order, complied with the order, been issued an NPDES permit and failed to
obtain a renewal upon expiration. . 25-54i(e) of the General Statutes states that when a
violator has complied with an abatement order, the Commissioner "may issue a permit whic
shall thereafter be deemed equivalent to a permit issued under subsection (b) of section
25-54i, provided a public hearing shall not be required prior to issuing such permit
unless required by the Federal Water Pollution Control Act." Since the hearing proviso
is the only limitation on its equivalence, such a permit falls under the auspices of
subsection i(c) as a permit "issued pursuant to this section." Therefore, it "may
be renewable for periods not to exceed five years, each, in accordance with procedures
and requirements established by the Commissioner, "(25~54ifc)(3)) and "shall be subject
to such other requirements and restrictions as the Commissioner deems necessary to
comply fully with the purposes of this chapter and the Federal Water Pollution Control
Act." (25-54i(c)(4)).
25-54i(c)(3) employs the discretionary "may" rather than the mandatory "shall." It
appears that this discretion must be vested solely in the Department, since there is
little reason for a source to exercise a permit option absent an attendant obligation o
some kind. The Department's discretion is then:
(1) Exercisable in terms of the applicable renewal period. According to Bob
Taylor's comments in the 1973 hearings, the language "not to exceed" was add
primarily for administrative convenience; if a single company, for instance,
has permits for several discharges originating at different times, the
Department has the power to establish a uniform expiration date. The Depart
ment may also use this provision to make Connecticut and NPDES permits con-
current.
(2) Limited by procedures established by the Commissioner. These are contained
in Directive 13, Manual Code 3325. This provides, among other things, that
the Department shall ensure compliance with a number of points, including
"any additions to, or revisions or modifications of (applicable) effluent
standards and limitations, water quality standards, or other legally applic-
able requirements during the term of the permit." It also requires anyone
wishing to continue to discharge beyond the term of an NPDES permit to applj
for reissuance at least 180 days prior to the expiration date.
SAVE TIME: // convenient, bandwritt reply to tender on tbit same sheet.
-------
216
There is, however, no specific penalty mandated for discharging after ^the expiration
date. Presumably, failure to apply would render a source subject to a moderate CA
based on a procedural violation of permit and/or order. But post-expiration discharging
in violation of standards (following either lapse or denial) might render the source
liable only to another abatement order, upon compliance with which a new state permit wouj
issue, recapitulating the procedure which initially brought him under the aegis of NPDES.
There would thus be no liability between the expiration date and the date of the new
final order which the Department could use as leverage against dilatory litigation.
While the spectacle of an endless series of five year plans might seem unduly cumber- .
some, it is arguably the most literal integration of i(c)(3) and i(e) with the rest of
Connecticut statute, which is silent as to pre-1967 permit obligation. The Connect-
icut courts opt for literal interpretation whenever possible.
25-54i(c)(4), however, provides a stronger argument for liability. It was amended in
1973 for the express purpose of complying with the FWPCA, and the language specifies
compliance not only with the literal wording but with the purposes of the act. Thus
the NPDES General Conditions, which the Department regularly attaches to orders and
permits, should be read in the light of the entire federal act.
Condition 11 states:
Any recipient of an order or permit who wishes to continue to
discharge water, substance or material to the waters of the
State of Connecticut after the expiration date of the order or
permit shall file for a reissuance of the order or permit on a.
form prescribed by the Director which shall include a complete
NPDES application no less than 180 days in advance of the date
of expiration.
The language of Condition 11 is substantially the same as that contained in 40 CFR
124.52 (Reissuance of NPDES permits), except that it substitutes "order or permit"
for "permit." The purpose is assuredly to bring Connecticut reissuance procedures in
line with those contained in the federal regulations.
The federal regulations do provide liability for post-expiration discharges. 40 CFR
124.52 does not set forth a specific penalty because to do so would be redundant;
40 CFR 124.10 (states to have laws prohibiting discharge without a permit) and
40 CFR 124.73 (authorizing civil penalties and other remedies) are sufficient.
It is true that Connecticut does not meet the literal language of 40 CFR 124,10 with
respect to pre-1967 polluters who have not come under order. But the reasons making
the order-compliance-permit process acceptable for the initial Department-source contact
are not applicable to the reissuance situation. The dichotomy between pre-1967 and
post-1967 polluters was originally conceived as an act of grace. In the words of the
Attorney General's Statement, sections 25-54g, 25-54h, 25-54J, and 25-54k of the General
Statutes "were designed to provide a time schedule for the abatement of sources of
pollution existing prior to May 1, 1967, or to provide a time schedule to abate potential
sources of pollution previously approved but no longer satisfactorily operating pollu-
tion abatement facilities.... The sources of pollution in Sections 25-54g, 25-54h,
25-54J and 25-54k were allowed to continue as long as the alleged polluter acted within
the framework of a time schedule for the abatement of pollution." Once a pre-1967
source has been issued an order, the time schedule is broken and any reason for prefer-
ential treatment evaporates. When the NPDES permit issued pursuant to 25-54i(e) ex-
pires, any further differentiation between pre and post-1967 polluters is groundless.
-------
217
Nor are the other arguments for initial non-liability applicable: '**
(1) The implicit exclusion of 25-54i(a) refers to initial obtainment, not
renewal.
(2) The Attorney General's Statement does not argue for post-expiration non-
liability, and in fact, as discussed, suggests the opposite.
(3) Directive 13, though silent on liability, is tailored to federal practice.
(4) Connecticut practice has not been inconsistent with post-expiration
liability.
It appears, then, that with 25-541(c)(4) as the key to the federal act, a pre-1967
polluter who has come under order and received a permit is thereafter liable for
operating without a permit. I think that the authority for this interpretation, while
indirect, is unambiguous. If the courts should find it ambiguous, however, any further
tests are likely to be decided in the Department's favor.
The language and purpose of the FWPCA clearly favor an uninterrupted legal obligation to
maintain increasingly effective pollution control facilities. The Attorney General's
statement makes it clear that Connecticut law is committed to the same purpose:
With reference to the goals to be accomplished under the
federal act of 1977 and 1983, we are of the opinion that
the Connecticut statutes are sufficient to authorize not
only compliance with federal requirements as they may become
more stringent, but to keep pace with the mandate of the
Connecticut legislature, the elimination of pollution through
technological advance.
This mandate could hardly be fulfilled if liability were allowed to lapse periodically.
Indeed, under the "bizarre result rule" said in United Aircraft v. Fusari, 163 Conn.
401, 311 A 2d 63 (1972) to be applicable in ambiguous cases, the Department could
argue that in the absence of supporting literal language, an interpretation which
allows a limitless series of litigative delays for no apparent reason is untenable.
There is nothing directly to the point in the legislative history of 25-54i(e), but
the peripheral commentary is marginally favorable. The announced purpose of the 1973
amendments was integration with the federal law, and one of the benefits to be derived
from subsection (3), according to the testimony of Bob Taylor, was a shifting of t' 5
administrative burden from Department to source, something that could hardly be
accomplished through intermittent issuance of orders:
When an order is issued there is no 5 year term attached
to the compliance with an order and it is the state's
obligation to reconsider on some schedule that isn't
specified. The Federal Law requires that that schedule
would be no more than 5 years and this really transfers
the obligation for reconsideration of the permit away from
a state initiation to an applicant initiation and allows us
a means to insure that those orders that are issued and
complied with really should be adequate to receive a permit.
-------
218
Finally, common law treatment of licenses and permits tends to assume that "the
purpose of a license is to make lawful what would be unlawful without'Ht." State y.
Minneapolis-St. Paul Metropolitan Airports Commission, 25 NW 2d 718, 725. The implicatio
is that while a permit creates a privilege for a stated term, it also creates a contingen
liability upon expiration if one did not exist before.
II. If 25-54i(c)(4) provides continuing future liability for pre-1967 polluters who
have come under order, it is unnecessary to ask whether 25-54i(e) brings them under
the provisions of i(a). And if i(c)(4) is insufficient, the i(e) ~> i(a) argument will
almost certainly fail. 25-54i(a) may be seen as an entrance way to i(b) and what
follows from i(b). 25-54i(e) is merely an alternate entrance way; it does intersect
with the former. And even if the i(e}-> i(a) transformation can be inferred, renewal
status is still subject to i(c)(3) and (4).
Furthermore, 25-54i(a) is badly' drafted, and may create a renewal loophole that can
only be countered by i(c)(4). Literally, i(a) states only that no person after 1967
:-,hall "initiate, create or originate any new discharge of water," Renewals do not
apply to new discharges and therefore are not covered by this section. All renewals,
pre and post-1967, devolve upon i(c), and any "bizarre result" argument advanced for a
broad interpretation of i(a) would be no stronger than that advanced supra for i(c)(4).
III. Preexistent liability can probably be established for all post-1967 polluters
and pre-1967 polluters who have come under order without any changes in statute or
regulation.
In order to reach pre-1967 polluters who have not come under an order, the Department
would do best to secure a statutory amendment abolishing the distinctions between
pre and post-1967 dischargers contained in 25-54h, i and j. General permit regulations
passed pursuant to the generally prohibitive 25-54f and the "incidental" clause
25-54c(k) would still be inconsistent with the only possible intent of i(a).
However, the federal standards could probably be adopted as regulations pursuant to
25-54f and 25-54c(k), and thus create a non-permit liability for pre-1967 polluters.
-------
SUGGESTION COMMITTEE SAY; Improve Your Own Condition; Eom Co»h ond Recognition: Send in o Suggeitionl
O 1 Q
Interdepartment Message
STO-201 REV.3/74 STATE or CONNECTICUT
(Stock No. 6938-051-01)
SAVE TIME: Handwritten messages art acceptable.
Use carbon if you really need a copy. If typewritten, ignore faint lines.
To
Fi-om
NAME
Phil
AGENCY
NAME
Fred
AGENCY
TITLE |
DATE
. 7/9/75
ADDRESS
TITLE
TELEPHONE
ADDRESS
SUBJECT
PERMIT LIABILITY OF PRE-1967 POLLUTERS
I tried to make the best argument I could for liability for operating without a
permit for pre-1967 sources as things stand now. As you will see, it's anything
but airtight; therefore, I think a change in the regs, if not the statute, is
warranted. If that isn't feasible, though, I think an argument along these general
lines would stand a fair (but only fair) chance of convincing the courts.
It appears that once a pre-1967 discharger has been issued an NPDES permit, he is
liable to a CA thereafter for discharging without one. The following factos urge
this conclusion:
1. The nature of a permit. /
2. The purposes of the federal act, to which the 1973 amendments
to the Connecticut statutes are designed to conform.
3. The reasonableness, for both the Department and the regulatee,
of continuing liability.
4. The bizarre implications of the contrary conclusion.
5. The fact that the Connecticut statutes are consistent with
this interpretation.
The Nature of a Permit
For regulatory purposes, the terms "license" and "permit" are synonymous. Parsons
v. People, 76 P. 666, 669 (1904); Standard Oil v. State Board of Equalization, 99
P. 2d 229, 234 (1940). The Connecticut courts have not specifically defined either,
but the standard common law definition, incorporated in numerous state courts opinions
is found in 53 C.J. Licenses, section 1:
The term "license" is not involved in uncertainty or doubt;
in its general and popular sense, as used with reference to
occupations and privileges, it means a right or permission
granted by some competent authority to do an act which,
without such license, would be illegal.
SAVE TIME: // convenient, band-write reply to sender on this same sheet.
-------
220
Thus, a permit confers a right which imples a "no right" or legal liability'in its
absence. And this right is strictly temporary:
i
A license confers upon the licensee the right to engage
in the licensed business only for the term specified in
the license. A prior expired license is functus officio
and confers no rights upon the licensee therein, except
in certain cases whereby statute it entitles him to a
renewal upon compliance with specified conditions.
State ex. rel. Interstate
Airparts v. Minneapolis
- St. Paul M. A. Comm.,
25 N.W. 2d 718, 725 (1947)
Expiration institutes the condition of legal liability which would have existed pre-
viously but for the permit.
In Connecticut, a pre-1967 discharger has no permit liability until he causes or
threatens to cause pollution and is issued an order to abate or correct. Once the
discharger has complied, the Commissioner in his discretion may choose to further
define the discharger's obligations by means of an NPDES permit. If a five year
obligation were all that were contemplated, there would be no reason for using two
mechanisms instead of a single long-term order. The use of a permit can only be
explained as a means of imposing continuous 'potential liability.
Purposes of the Federal Ac t
The language of the 1973 amendments specifies compliance with the purposes of the
federal act, and the federal act makes it illegal, not merely remediable by means
of an order, to discharge after the expiration of a permit, (40 CFR 124.51, 124.52
and 124.10). It is true that Connecticut does not meet the literal requirements of
40 CFR 124.10 with respect to pre-1967 dischargers who have not come under order,
but the reasons making the order-compliance-permit process acceptable for the initial
Department-source contact are not applicable to the reissuance situation. Under
25-54i, sources already in existence were accorded the benefit of not having to go
through the process of obtaining a permit for a simple discharge. Once their dis-
charges caused or threatened to cause pollution, however, and they were issued an
order, there would be no more reason for preferential treatment. Indeed, 25-54i(e)
specifically removed any benefit for a pre-1967 polluter or pollution threatener
by providing that he could be issued a permit "thereafter deemed equivalent to a
permit issued under subsection (b) of section 25-54i."
If he is considered under subsection (b), he is subject to the renewal provisions of
subsection (c). Subsection (c) either provides him with renewal liability by implic-
ation or it does not. If it does not for the pre-1967 source but does for the
post-1967 source, then the Connecticut statutes contain a grandfather clause for-
bidden in the comment to 40 CFR 124.10 and denied by the Attorney General. If it
does not provide renewal liability for either category of source, it countermands
the purposes of the federal act expressed in 40 CFR 124.51, 124.52 and 124.10. If
it does provide for renewal liability, there is no conflict.
-------
221
Reasonableness
Continuing permittee liability is a far more reasonable administrative tool'for the
Department than intermittent susceptibility of the regulatee to an order. It shifts
the major burden of reconsideration to the source, and lessens the'probability that
there will be long periods of substandard performance.
Nor is it at all unreasonable from the point of view of the source faced with stiffen-
ing effluent standards. New federal standards are typically announced far in advance
of their effective dates in order to give the source time to comply. Moreover, since
his permit requires the source to apply for renewal at least 180 days before expira-
tions, he has ample notice and time to at least commence compliance with new standards.
Finally, 40 CFR 124.44 allows the Department to attach a lenient schedule of compliance
to the new permit. Although an ordinary state permit is not issued with installation,
an NPDES permit is not subject to this restriction.
Bizarre Implications of the Contrary
If the issuance of an NPDES permit carries with it no attendant liability, what
effect does it have? If a source violates its terms, it can be taken away. If it
is taken away, the source is operating without a permit, but since he is not required
to have one and he has (necessarily) already complied with the Department's order,
he is legally no worse off. Thus the NPDES permit is reduced to a kind of recall-
able certificate of merit for complying with an order.
If, on the other hand, the issuance of an NPDES permit does carry liability, there
is no reason to assume, in the absence of specific language to the contrary, that
the liability differs from that associated with all other NPDES permits (and permits
in general) in that it terminates after five years.
Consistency with Other Conn. Provisions
This interpretation does not contradict or render useless any other statute. 25-54h,
together with 25-54i(e), is designed to bring a pre-1967 polluter (eventually) under
the NPDES system.
25-54k, together with 25-54i(e), is complementary; it enables the Department to bring
a previously untouched pre—1967 source who has not polluted yet, but who (in the face
of new standards, perhaps) probably will in the future, under the NPDES system.
25-54j insures that the Department is not limited by its own orders or permits. If
circumstances dictate (for instance if water quality standards are threatened) the
Department can unilaterally modify a permit or order before its termination date.
Such a modification order would 6f course include a time schedule.
Finally, since the AG keeps stressing the equivalence of an order and an NPDES permit,
it is perhaps legitimate to think of an NPDES permit as a continuing order, the
violation of which (non-renewal) is subject to a CA.
-------
222
O&M REQUIREMENTS: SCOPE OF REVIEW
0 & M standards may be required in regulations or orders
or may be used as elements of proof in establishing an emissions
violation.
The standard of review for administrative regulations is
narrow. The chief danger is that a court will find that the
correlation between O&M requirements and emissions levels is so
tenuous that such regulations are not necessary for carrying out
the Commissioner's duties. This is technically a question of
law rather than of fact. In practice, however, (1) the courts
may be willing to defer to agency expertise in this regard and
(2) correlations are likely to be high. The second danger is
a constitutional one — that the courts will find the definition
of "controlled source" to be overly narrow and thus a violation
of equal protection. However, a reasonable showing of adminis-
trative convenience is an adequate defense to this objection.
The standard of review for orders is somewhat broader. The
major concern, that the courts will find the "order" a disguised
regulation, is treated in a separate memo. The second concern
is that the hearing officer might restrict admissible evidence
in such a way as to offend the spirit of the APA. Other grounds
for reversal of course exist, but these are minimized due to the
deference accorded to remedial and health-related regulations
by the Connecticut courts.
O&M parameter data may provide circumstantial evidence for
the proof of an emissions violation. In Connecticut this is
the equivalent of direct evidence. However, it may not be
possible to use evidence of a single O&M failure to prove a con-
tinuous emissions violation. The Department may circumvent this
limitation if it can persuade the courts to adopt the Wigmore-
McCormick view that the burden of proof should fall upon the
party possessing "peculiar knowledge of the facts."
-------
SUGGESTION COMMITTEE SAY: Improve Your Own Condition; Earn Cash and Recognition: Send in o Suggestion!
Interdepartmenl Message
STO-201 REV.3/74 StATE OF CONNECTICUT
(Stack No, SS38-!)5i-01)
223
SAVE TIME: Handwritten messages are acceptable.
Use carbon if you redly need a copy. If typewritten, ignore faint lines.
To
From
NAME
David
AGENCY
NAME
Fred
AGENCY
TITLE
DATE
7/26/75
ADDRESS
TITLE
TELEPHONE
ADDRESS
SUBJECT
SCOPE OF REVIEW: O&M
I. Judicial Review of O&M Requirements Embodied in Regulations
If O&M requirements are embodied in regulations, they may be
challenged in a declaratory judgment proceeding or in an appeal from
a decision that applies them to a specific source or group of sources.
If a source elects the declaratory judgment route, he must first re-
quest the Department to pass upon the validity or applicability of
the regulation pursuant to its declaratory ruling authority §§4-175
and 4-176). If the Department refuses, or if it renders a ruling
unfavorable to the source, the source may then institute a declaratory
judgment proceeding in the Court of Common Pleas for, Hartford County.
If, on the other hand, a source bases his appeal upon an unfavorable
adjudication, the rule upon which the decision is based is nonethe-
less reviewable by the Court of Common Pleas in his home county pur-
suant to §4-183.
Whichever route is chosen, the scope of review is relatively
narrow. Since the legislature has delegated the Department the power
to adopt regulations (section 22a-6(1)), any regulation embodying O&M
requirements would be classed as a "legislative" rather than an
"interpretative" rule. It would not therefore be open to the question
of whether it had correctly interpreted the parent statute or whether
it amounted to an attempt to exercise legislative power which had not
been delegated. It could, however, be attacked on the following
grounds:
1. that it does not reasonably relate to the subject
matter on which power to legislate has been delegated;
2. that it does not conform to standards prescribed in
the enabling statute;
3. that it is invalid on constitutional grounds.
Cooper claims that the courts currently (1965) pass upon the valid-
ity of administrative rules in light of five commonly announced "tests."
He stresses that these criteria are not talismanic, that they are fre-
quently little more than the formal habiliment for a policy decision
on the assessment of an agency's overall repute. Moreover, the tests
SAVE TIME: // convenient, bandwrite reply to sender on this same sheet.
-------
224
overlap considerably. Still, they provide perhaps the best available
scheme for analyziny the scope of judicial review of regulations.
They are:
A. A rule is invalid if it exceeds the authority conferred.
B. A rule is invalid if it conflicts with the governing
statute.
C. A rule is void if it extends or modifies the statute.
D. A rule having no reasonable relationship to statutory
purpose is void.
E. A rule deemed to be unconstitutional or arbitrary or
unreasonable will be set aside by the courts.
A. EXCESS
The presumption of validity generally accorded to a legislative rule
is not absolute, but contingent. The presumption exists if and only if
the rule comes within the scope of delegated authority, and the initial
determination of this is for the courts. In the New Jersey case In re
West on, the court declared that "unless [the regulations] are clearly
ultra vires on their face, the person attacking them has the burden of
proving otherwise," 176 A. 2d 479 (1961). But the ultra vires clas<=-
does not have to be demonstrated or even asserted by the
opportion. Thus, if the deleaated rule-making power is contingent upon
the fulfillment of certain conditions, a court can take it upon itself
to determine whether those conditions have been fulfilled.
If the Department's O&M regulations arc issued pursuant to §22a-6,
or if 22a-6 is held controlling in the issuance of any Departmental
regulation despite its nominal parent, a Connecticut court might
declare them invalid on the grounds that they are not "necessary"
(22a-6(l)) for the carrying out of his function, powers and duties.
Obviously, a court is much more likely to make this determination if
it is convinced that the requirements do not correlate with the
emissions they are supposed to control.
Similarly, since 22a-6(l) delegates the power to adopt regulations
"necessary and proper to carry out [the Commissioner's] functions,
powers and duties, " a Connecticut court could hold that the delineation
of those powers and duties in §22a-5 is either too vague generally or
sufficiently specific in other respects that it implicitly excludes the
matter of operation and maintenance. Again, a court is much more
likely to react this way if it sees an insufficient correlation
between the requirements and emissions. And again, since the issue
is ultra vires, the insufficiency relates to a matter of law rather
than fact, so the determination is not one within the area of agency
expertise.
-------
225
Courts will invalidate a rule under this test by interpreting
the general terms of a statute as being implicitly limited by legis-
lative intent. In McKibben v. Michigan Corporation and Securities
Commission, 119 N. W". 2d 557 (1963T, the court struck a regulation
making it illegal for a broker to refuse to buy-or sell a house forreason.
of race, color or creed. The enabling statute empowered the -Commission
to adopt regulations prohibiting "unfair dealing," but the court found
that while discrimination was "unfair," the legislature had had in
mind only specifically economic "unfair dealings," 119 N.W. 2d, at 565.
And in Lev/is v. Florida State Board of Health, 143 So. 2d 867 (1962) ,
the Florida Supreme Court held that a regulation governing the use of
toxic pesticides on lawns and shrubbery was not a "health" regulation
in the sense used in the statute. The court said that
a statute that is too vague and incomplete as a
law in itself cannot be used as a vehicle for
an administrative body to proceed to establish
adopt and promulgate a code for regulating a
particular industry. The tulemaking power
of the Board is limited to the making of rules
and regulations necessary to the enforcement
of the Act. It is incumbent upon an agency
relying on an act as authority for its regula-
tions to prescribe only such regulations as
come within the specifications laid down
143 So. 2d, at 877.
The court also quoted favorably from an earlier decision in Phillips
Petroleum Co. v. Anderson, 74 So. 2d 544 (1954) :
Whenever regulations are to be imposed in order
to promote health, welfare, safety and morals,
it is necessary that exactions be fixed in the
ordinance with such certainty that they not be
left to the whim or caprice of the administrative
agency, 74 So. 2d, at 547.
It is important to keep in mind, however, that the thrust of this
statement runs counter to the predominant policy of the Connecticut
courts, which have generally relaxed their scrutiny of vague statutory
provisions when the subject matter deals with health or safety or when
particularly complex economic or administrative conditions are present. •
See State v. Vachor, 140 Conn. 478 (1953); Forest Construction Co. v
Planning and Zoning Comm., 236 A.2d 917 (1967); Aunt Hack Ridge Estates
v. Planning Com™., 160 Conn. 109 (1970).
B. CONFLICT
A court will overrule on this test when there is wording in the
regulation that contradicts the wording of the governing statute or
runs counter to its overruling purpose. Instances of blatant contradictioi
-------
226
are very rare, but a conflict in purpose can occur whenever a
regulation imposes any limitations on the implementation of
legislative policy. In Teachers Retirement System v. Duckworth,
260 S.W. 2d 632 (1953), aff'd 2fa4 S. W,. 2d 9B "(1954) , the Texas
Court of Civil Appeals found that a rule refusing to provide
apportioned payments for the month during which a teacher had
died conflicted with the overall purpose of "providing support
for teachers after their teaching days are over." The rule was
void although it had prevailed unchallenged for years. In the
case of the Department's O&M regulations, however, the conflict
Lest seems out of the question, since there is nothing in the
statutes that could be contradicted or limited by precise standards
C. EXTREMES
A court will invalidate a regulation if it feels that it
gives effect to a policy that extends the one set forth in the
governing statute. In Stone v. Harris, 95 N.W. 2d 765 (1959),
the Wisconsin Supreme Court set aside a rule by the Board of
Examiners in Optometry classifying certain advertising practices
as "unprofessional conduct." Though the statute prohibited
unprofessional conduct in one section, il had another covering
prohibited advertising, in which the practices forbidden by the
rulea were not included. The court said that the inference was
"clear Lhat if the legislature had intended to prohibit the type
of advertising covered by the rules of the board it would have
so stated in [the proper section] ," 95 N.W. 2d, at 766. And
in Livestock State Bank v. State Banking Commission, 127 N.W.
2d 139 (1964), the South Dakota Supreme Court declared invalid
a rule by the Banking Commission restricting the location of
branch offices and branch banks. The statute authorized the
State Banking Commission "to adopt all necessary rules and reg-
ulations not inconsistent with the laws of tliis state for the'
management and administration of banks doing business under the
laws of this state." Despite the breadth of this wording, the
court found "nothing therein indicating that the legislature
contemplated that the rules to be adopted by the Commission for
'the management and administration of banks' should extend be-
yond the area of bank operation as contrasted to bank location./"
127 N.W. 2d, at 141.
It would be possible for a Connecticut court to find that
the O&M regulations extend the purpose of the statute for reasons
similar to those which could be used in establishing an excess
of authority. But again the history of the Connecticut Supreme
Court's decisions in this area strongly suggests that it will not.
The only case of which I am aware in which a regulation was in-
validated on this test is Avonside, Inc. v. Zoning and Planning
Comm. of Avon, 215 A.2d 409 (1965).There the board had passed
a regulation requiring that a developer pay a stated percentage
of the cost of constructing streets, when Lhe only statute re-
motely relating thereto empowered the board to accept a bond in
-------
227
lieu of demandiny actual completion of improvements before final
approval. Since the board's action was wholly removed from its
authorization, the court had no choice. But in debatable areas
"the meaning of a statute or regulation...should be construed,
if it reasonably can be done, so as to make it valid," Citerella
v. United Illuminating, 158 Conn. 600, 608 (1969). See also
Carillo v. Pension Comm. 154 Conn. 1, 8 (1965).
D. NO REASONABLE RELATION
This test appears to be a hybrid between excess of author-
ity and unconstitutionality and will be considered under the
general discussion of the next topic.
E, UNCONSTITUTIONALITY
1. Unreasonable. If the courts are convinced that the correla-
tion between O&M requirements and emissions is non-existent
or too remote, they may strike them on the grounds of un-
reasonableness. The Connecticut Supreme Court has in the past
scrutinized zoning ordinances with great care, but has over-
ruled only upon a finding of "no rational relation to public
health, safaty, welfare and prosperity of the community ,"
Carthouts v. Town of Newington, 140 Conn. 284 (1953). But see
Del Buono v. Board of Zoning^143 Conn. 673 (19^6), in which the
present unreasonableness, due to changed patterns, of a former
residential restriction was held to be a violation of due
process.
On balance, there is very little chance for invalidation
of this test. If pollution control equipment bears a rational
relation to emission levels, the proper use of that equipment
does as well. Only if the parameter standards are found to be
so stringent that they force the source to operate within a
narrow band of an otherwise permissible emissions-producing
spectrum is the court yet to find them "unreasonable" in the
sense of arbitrary and capricious.
2> Vague. If the requirements are not sufficiently well-
defined in the regulations, but await detailed application
through the class order device, a court may be disposed to in-
validate them on the grounds of unconstitutional vagueness.
The Connecticut Supreme Court has used this test on at least two
fairly recent occasions in the area of zoning regulation. In
Powers v. Common Council, 154 Conn. 156 (1966), the court overturned
a regulation stating that "the site plan of such [multiple hous-
iny] project shall be subject to the approval of the Planning
Commission especially as to traffic access, safety and the
adequacy of parking facilities" because of an absence of stand-
ards. See also Fox v. Zoning Board of Appeals, 146 Conn. 165
(1959). But, as mentioned repeatedly above, this standards is
deliberately relaxed in matters pertaining to health and safety
or involving highly complex conditions.
-------
228
3. Equal Protection. If the courts can be convinced that one
of the bases for an O&M classification is unreasonable, it may
declare the regulation establishing it tc be in violation of
equal protection. It appears that the only potential problem
for the Department in this respect is the inclusiveness of its
definition of "controlled source;" specifically, whether those
for whom "other abatement strategies" have been prescribed and
those who have complied without an order should be covered. But
even if there is a difficulty here, the burden of establishing
an equal protection violation is "extremely formidable." Even
if a distinction appears to have little rational basis from an
absolute, it must be recognized that the legislature or an
agency acting in a legislative capacity may "limit its action
upon a decision to proceed cautiously, step by step, or because
of political exigencies, including administrative conveneience
and expense." N.J. Restaurant Ass'n v. Holdeman, 131 A. 2d 773,
776 (1957).
4. Self-Incrimination. The coexistence of reporting require-
ments and specific parameter standards may raise the question
of self-incrimination under the Fifth Amendment. As previous
uiemos have demonstrated, this is unlikely and in any case of
limited concern, since the privilege does not apply to corpor-
ations .
II. Judicial Review of O&M Requirements Embodied in an Order
Section 4-183 (g) of the General Statutes specifies six
possible grounds for the reversal of an administrative decision
in a contested case:
1. in violation of constitutional or statutory provisions;
2. in excess of the statutory authority of the agency;
3. made upon unlawful procedure;
4. affected by other error of law;
5. clearly erroneous in view of the reliable, probative,
and substantial evidence on the whole record; or
6. arbitrary or capricious or characterized by abuse
of discretion or clearly unwarranted exercise of
discretion.
The first two issues have been considered in the previous
section concerning review of regulations, and those considerations
are generally applicable here. The other four issues will be
considered successively.
-------
229
A. UNLAWFUL PROCEDURE
If the Department issues a class-wide order pursuant to
regulations of general scope, it is possible that a reviewing
court may find that the requirements should have been promul-
gated via the rulemaking process. This question has been addressed
in a previous memo? it remains the primary area of concern.
If the Department fails to consider a matter which the re-
viewing court feels it should have considered, or excludes
evidence which the court regards as relevant, its decision may
be subject to reversal. There are countless cases resulting
in remand on these bases, and in most instances the decision of
impropriety appears to rest upon an ad hoc determination rather
than any formulable standards. It would be best for the Depart-
ment to give on-the-record consideration to every matter re-
ceived in evidence and to receive in evidence every matter not
egregiously repetitious or beside the point.
B. ERROR OF LAW
The courts will review questions of law, but not questions
of basic fact. Thus, they will determine whether the Department
has correctly interpreted and applied the substantive provisions
of the statutes and regulations, but they will, in nearly every
instance, permit its judgment on evidentiary matters, such as
the capability of a particular piece of equipment, to stand.
Between the direct question of lav/ and the basic question of
fact is the inference of "ultimate fact." Ultimate facts are
usually phrased directly from the applicable statute or regula-
tion and may include language such as "reasonable," "fit, "
"job-related," "in the public interest," or "necessary under the
circumstances." Traditionally, the reasonableness of the in-
ference from basic fact to ultimate fact is itself a question
of law and therefore the province of the courts.
Cooper claims that state courts have on the whole been much
more willing than the federal courts to examine the reasonable-
ness of such inferences. And the criteria urging reviewability
are likely to be other than a largely artificial discrimination
between the universe of fact and the universe of law. Policy
considerations and general agency repute play an important role;
perhaps most important is the court's assessments of itc overall
qualifications vis-a-vis the agency's. Connecticut courts will
review the reasonableness of an inference, but their willingness
has been evidenced almost exclusively in cases of a non-technical
nature.
In a number of cases involving the Administrator of the
Unemployment Compensation Act during the mid-nineteen fifties,
Connecticut courts have found the following ultimate facts to
be within their purview: "adjustment for overcompensation,"
Allen Mfg. Co. v. Administrator, 139 Conn. 402; "payment by
way of compensation for loss of wages," Brannigan v. Administrator,
142 Conn.160. 1955 Only one case (Brannigan) entailed an agency
reversal.
-------
230
In two mid-fifties cases involving town ordinances, the courts
reviewed the ultimate facts "package store" and "street." Danbury
v. Corbett, 139 Conn. 379; Park Construction Co. y. GreenwTch~~
Planning and Zoning Board, 142 Conn. 30 (195~5) ; The latter entailed the
reversal of the board's determination upon a contrary judgment
of statutory intent. But in New Canaan County School y. Town
of New Canaan, 84 A. 2d 691 (1951), the Connecticut Supreme Court
reversed a judgment of the Court of Common Pleas reversing the
town's refusal to exempt from taxation the living quarters of
certain teachers. The ultimate fact in question here was "ex-
clusively for educational purposes."
But with respect to technical questions and matters involving
licensure, the Connecticut pattern has been one of judicial self-
restraint. Typical of this trend is the recent case of Blesso v.
Board of Plumbing and Piping Examiners, 310 A. 2d 136(1973), in
which the Hartford Court of Common Pleas denied an appeal from
license suspension, asserting that "the record will not be reviewed
to determine whether this court would come to the same conclusion,"
310 A.2d, at 137. This course was followed even though §20-336,
(concerning plumbers' licenses) provides that "after a hearing
de novo said court shall affirm, modify or reverse the action of
said board." The court said that only in the qualified sense that
it considers all matters relating to the legal propriety of the
board's action is the manner of judicial review "de novo."
It appears, then, that the courts will probably not subject
any reasonable inference of ultimate fact by the Department to
judicial review. It follows, nonetheless, that the fewer the
ultimate facts concerning which the courts will feel as competent
as the Department, the smaller the probability for reversal. It
seems best, therefore, that if the Department chooses to impose
class-wide O&M requirements pursuant to a general enabling regula-
tion, that the standards of that regulation be as technical as
possible, while allowing specifically for departmental discretion.
C. CLEARLY ERRONEOUS
Under the Revised Model Stats Act working adopted by Connecticut,
there appears to be very little vulnerability for the Department on
this issue. Even under the older "substantial evidence" formulation,
which was considerably more open to manipulation, the restraint of
the Connecticut court was apparent:
The Commissioner is the trier of the facts and
his finding is of the same import as the finding
of a trial judge. 'Settling the credit of wit-
nesses; weighing evidence; ascertaining the
truth froni conflicting testimony or incongruous
evidential facts;' — is 'within the exclusive
jurisdiction' of the Commissioner. His finding,
-------
231
insofar as it discloses the facts so determined,
which we designate subordinate facts, cannot
be changed unless the record discloses that
the finding includes matters found to be facts
without evidence, or fails to include material
facts which are admitted or undisputed facts."
Narschner v. American Hardware Corp, 141 Conn.
742, 747-48 (1954).
The Connecticut Supreme Court has overturned administrative de-
cisions based upon a lack of "substantial evidence," but in these
cases, mostly having to do with labor relations, the evidentiary
lack concerned moral or judgmental, rather than empirical facts.
In Hoyt-Bedford Co. v. Conn. State Board of Labor Relations, 147
Conn. 142(1960), the Connecticut Supreme Court reversed the board's
finding of "unfair labor practices" based in turn upon a finding
of "hostility to union activity." In reviewing the rather scanty
evidence for this conclusion (as much one of law as of fact) the
court said:
Substantial evidence...is evidence that carries
convincticn...It is such relevant evidence as
a reasonable mind might accept as adequate to
support a conclusion.... It means something more
than a mere scintilla and must do more than
create a suspicion of the existence of the
fact to be established," 147 Conn., at 147.
Even under this test, it would be difficult to invalidate straight-
forward, empirical findings of fact. Under the modern "clearly
erroneous" test, it should be next to impossible.
D. ARBITRARY OR CAPRICIOUS
Th«re is nothing inherent in the imposition of O&M requirements
to suggest that this will be an issue. It is likely to arise only
in the context of inconsistent applications of requirements in
different cases in which no legitimate basis for distinction is
evident.
-------
232
SCOPE OF REVIEW; POSTSCRIPT
I. Regulations.
A. Authority
The principal concern here is that a reviewing court will find
that the correlation between the department's O&M requirements and
emissions levels is so tenuous that such regulations are not nec-
essary for carrying out the Commissioner's powers and duties. As
part of the threshhold question of statutory authority, this is
a question of law rather than of fact; therefore, the traditional
deference due the Department's expertise is not required. From
a practical standpoint, however, (1) the Department is more
qualified than the courts even though this is a queetTon of lav,7,
and (2) the correlation between the requirements and emissions
levels is likely to be quite high.
B- CONSTITUTIONALITY
Of the several possible issues here, the only immediately
alarming one is equal protection, as it relates to 19-508-26.
(Gee page 9 of 6/27 version.) I think extending the "defense"
to group (2) is necessary, and I think some thought should be given
to extending it to group (3) as well. But i™ any event, the burden
upon the opposition to prove an equal protection violation is very
severe, and the rationale of administrative convenience is an
adequate defense.
II. Orders.
The major concern here has been covered: the continuing possibil-
ity that the courts will find that what the Department calls an
order is a regulation, and therefore subject to the rulemaking
process. The second is that the Department will invoke the option
of restricting the source's evidence. Since the APA gives each
agency abundant discretion in admitting evidence, this is not
clearly illegal. But it is revlewabic on an ad hoc basis, and
therefore could provide a hostile court with an easy means of
reversal.
Grounds (and in some cases precedent) for reversal exist in
the other areas covered as well. But in view of the fact that O&M
is a matter of health and is highly technical subject, the actual
probability of reversal appears encouragingly remote.
-------
233
To: David
From: Fred
III Evidentiary Status of 0 & M Data
In the absence of binding O & M requirements, the Department may
wish to use 0 & M data as proof of an emmissions violation. If so, the
Department, as the moving party in an administrative proceeding, has
two burdens: the initial burden of going forward with the evidence and
the ultimate burden of persuasion. These will be considered in turn.
The burden of going forward with the evidence is the equivalent of
liability to a directed verdict. This burden may shift from party to
party during the course of the trial, and the failure to meet it at any
time by either party is decisive of the issue. Only when both parties
have met their burdens and all the evidence is in, does the burden of
ultimate persuasion become significant.
The initial burden may be satisfied through direct evidence,
circumstantial evidence (carrying with it an inference or a presumption
of fact), or a presumption of law. Since there is now no presumption of
law regarding the relation between O & M data and an emission violation,
and since 0 & M data is not direct evidence of emissions, the Department's
evidence would be classified as circumstantial. In some jurisdictions
this classification would have bearing on legal sufficiency, but in
Connecticut, "the law raises no distinction between direct and circum-
stantial evidence." Notarfranceso V. Smith, 105 Conn. 49, 52 (1926).
See also State v. Pane, 64 Conn. 329, 331 (1894). Thus, " a plaintiff
may sustain the burden of proof by circumstantial evidence. In many
-------
234
cases ... it is the only evidence available to prove a fact material to
a party's course of action." Badela v. Karpowich, 152 Conn. 360, 363
(1964). See also Hennessey v. Hennessey, 145 Conn. 211, 214 (1958).
The Department will satisfy its burden of going forward if it
produces "evidence of such quality and weight that reasonable and fair -
minded men in the exercise of impartial judgment might reach different
conclusions." Boeing Co. v. Shipman, 411 F. 2d. 365, 374 (5th Cir, 1969).
If the Department has done no more than to meet its burden, the regulatee
may choose to remain silent or to produce evidence of his own. If he
does remain silent, or if he produces evidence such that fair-minded men
may still reach different conclusions, the burden of going forward with
the evidence is at an end, and the case will be decided on the basis of
whether the burden of ultimate persuasion has been met.
If, however, the Department not only meets its burden but goes
further, adducing evidence which, if believed, would compel a fair-minded
man to decide in its favor, the hearing officer may require the regulatee
to produce evidence under pain of losing the case. The converse is true
if the regulatee answers the Department's initial case with evidence of
compelling persuasiveness. The hearing officer may go about this in two
ways. He may render a verdict for the proponent on the strength of the
mass of evidence or he may create a rebuttable presumption that the
evidence adduced "in common experience leads naturally and logically to
the fact inferred or presumed." Mott v. Frassinelli, 148 Conn. 481,
490 (1961). The presumption serves the purpose of evidence (New London
v. N. Y., N. H. & H. R. Co., 85 Conn. 596, 1912) but evaporates if the
opponent comes forward with other evidence.
-------
235
Though this model theoretically controls the administrative contested
case, it is obviously derived from and is more directly applicable to the
judge - jury situation. Since there is no jury in an administrative pro-
ceeding, there is often no need for discriminating between points of de-
cision. A close decision concerning the burden of going forward with the
evidence may be quite clear in terms of the ultimate burden of persuasion.
That burden in Connecticut is not as severe as it is in some juris-
dictions, where circumstantial evidence is insufficient "unless circum-
stances proved are of such nature and so related to each other that the
conclusion reached is the only one that can be fairly and reasonably
drawn therefrom." Bowers v. Maire, 137 N. W. 2d 796, 798 (1965). The
Connecticut courts, as indicated supra, recognigej-that circumstantial
wf
evidence is often the only kind available. They have also held consis-
tently that an inference from circumstantail evidence need not exclude
other hypotheses. Foster v. Hartford Buick, 131 Conn. 348, 351 (1944).
International Brotherhood v. Commission on Civil Rights, 140 Conn. 537
(1953). The most frequent formulation of the test is "whether the
evidence, fairly and impartially considered, would be likely to induce
in the minds of twelve men of ordinary intelligence attentively consider-
ing it and using common sense logic 'a reasonable belief that it is more
probable than otherwise that the fact in issue is true.1" Robinson v.
Southern New England Telephone Co., 140 Conn. 414, 420 (1953). See also
Rocky Hill Convalescent Hospital v. The Mstropolitan District, 160 Conn.
446 (1971); Ducharme v. City of Putnam, 161 Conn. 135 (1971).
Thus, 0 & M data will support an inference which, if considered
probable, will establish an emissions violation whether or not the regula-
tee responds with evidence of his own. This inference, based on circum-
-------
236
stantial evidence, will be every bit as valid as "direct" evidence.
There are two qualifications to this general assessment. First,
Connecticut is among the majority of states generally subscribing to the
evidentiary principle that although a circumstantial inference is per-
missible, an inference based upon an inference cannot satisfy the burden
of persuasion. Thus, for instance, an O & M "violation" (assuming there
are no binding requirements) may establish a emissions violation, and
single emissions violation, may establish a continuous violation, but a
single O & M "violation" could not of itself establish a continuous emis-
sions violation. Although the principle has been severely criticized, it
has generally prevailed in Connecticut since State v. Kelly, 77 Conn. 266
(1904). There are, however, unequivocal exceptions. See Ruerat v. Stevens,
113 Conn. 333 (1931); Sliuouski v. N. Y., N. H. & H. R. Co., 94 Conn. 303
(1920); and Kakluskas v. Somers Motor Lines, 134 Conn. 35 (1947), in which
Wigmore is invoked. "There is, in fact, no rule of law that forbids the
resting of one inference upon facts whose determination is the result of
other inferences." Wigmore on Evidence, section 41.
The second qualification to the general assessment is that if the
regulatee can be shown to have peculiar knowledge of the facts, e.g. direct
evidence or equally good circumstantial evidence concerning the emissions
violations, the entire burden may be placed upon him. This view has been
expressed at least once in Connecticut, in a concurring opinion by Justice
Wheeler (taking issue with Justice Thayer) in Grant v. New Departure MFG.
Co., 85 Conn. 421, 429 (1912). This was an action to recover the unpaid
balance on a broken employment contract. The measure of damages was the
contract price less what the plaintiff should have earned by the exercise
of reasonable diligence. Justice Wheeler asserted that the burden of proof
of non-employment and due diligence should be on the plaintiff, "the party
-------
237
who presumably has peculiar knowledge of the fact." 85 Conn., at 429.
Wigmore (cited by Wheeler) is in agreement with this view, as in McCormick.
But its general acceptance in Connecticut remains unlikely, due to the
persistence of the rule that the moving party must first promulgate a
prima facie case, Middletown Trust Co. v. Bregman, 118 Conn. 651 (1934).
-------
238
IMPOSITION OF CLASS-WIDE O&M STANDARDS
The Department would prefer to impose O&M requirements by
means of a class-wide order which could be appealed by those
affected in a single adjudicatory hearing. There is some pos-
sibility that the courts may regard such orders as disguised
rules and invalidate them for want of proper promulgation. But
on balance it appears that the device will be acceptable.
The danger of "rule" classification may be avoided:
(1) If the class is sufficiently well-defined and
the effect of the order is strictly confined
to those individuals and companies that have
received notice from the Department. If these
conditions are met the courts may find that the
statement is not sufficiently "general" to meet
the definition of "rule."
(2) If classification as either rule or order is
appropriate and the Department has the dis-
cretion to treat the statement either way when
such a choice exists, U. S. Supreme Court de-
cisions usually favor the rulemaking procedure,
but they do not compel it. In any case, federal
decisions look to the Federal Administrative
Procedure Act, which has a broader definition
of rule than does the Connecticut A.P.A. There
are no foreign state or Connecticut cases which
mandate the rulemaking treatment.
If the class-wide order device proves unworkable, the
Department may be able to impose the requirements via a declar-
atory ruling. A 1973 amendment to Connecticut's A.P.A,, appears to
give an agency the power to issue such a ruling internally, but
internal issuance, as opposed to issuance in response to a peti-
tion, may not be binding. Some authorities assert that the
declaratory ruling power is an implicit incident to the rule-
making power and thus requires no statutory authority. But
the one Connecticut case remotely in point suggests the contrary.
-------
SUGGESTION COMMITTEE SAY; Improve Your Own Condition; Earn Cash and Recognition: Send in o Suggestionl
Inferdeparfmenf Message 239
SAVE TIME: Handwritten messages are acceptable.
STO-201 REV 3/74 STATE OF CONNECTICUT Vse carbon if you really need a copy. If typewritten, ignore faint line,.
(5(OCR \o. o" 7#-fl5j-01) •
To
from
NAME
David
AGENCY
NAME
Fred
AGENCY
TITLE ,
ADDRESS
TITLE
DATE
July 5, 1975
TELEPHONE
ADDRESS
SUBJECT
A MEANS FOR IMPOSING CLASS-WIDE O&M REQUIREMENTS
Introduction
The Department's ability to set forth enforceable O&M requirements on a class-wide
basis will hinge to a great extent upon genre. The principal danger is that a
reviewing court will characterize as a regulation what the Department terms an order
or a ruling, and then invalidate the regulation for want of proper procedure. Any
appeal from a departmental action is certain to adopt this course; whether the
Department's determination can survive it is not certain.
The Definitions of Rule and Regulation
A. Connecticut's definition of "regulation" differs from the federal definition of
"rule" in that the former refers to statements "of general applicability" while the
latter includes statements "of general or particular applicability." Davis maintains
that "or particular" was added to the federal APA to make clear "that what is other-
wise rulemaking does not become adjudication merely because it applies only to
particular parties or to a particular situation." (Davis, s. 5.02.) Connecticut's
definition was derived from the Revised Model State Act, the official comment to whicl
notes the distinction:
The phrase "or particular applicability" in the federal, act is
omitted from the Model Act, thus limiting its scope but clarify-
ing its meaning. Attention should be called to the fact that
rules, like statutory provisions, may be of "general applic^-
ability" even though they may be of immediate concern to only
a single person or corporation, provided the form is general
and others who may qualify in the future will fall within its
provisions.
(R.M.S.A., Comment
to 2(c))
The 'limitation in scope,' according to Cooper, results from the exclusion of "certai
rulings which apply to a single person or a small well defined group." (Cooper, 108)
Before the 1971 amendment, Connecticut's definition was to much the same effect. It
referred to any statement made "to establish the general policy" of the agency, but
. specifically excluded "any rules, regulation, orders, approvals, findings, decision
or authorizations addressed to or served upon particular or named individuals,
partnerships, corporations or associations and not of general applicability." (C.G.S.
4-41, 1949 Rev.) But there have been no Connecticut cases construing the meaning of
SAVE TIME: // convenient, hand-write reply to sender on Ms same sheet.
-------
24.0
"general applicability." Even in other states, the substantial majority of whose
definitions conform to the Revised Model State Act, there has been very little litiga-
tion on the point. In Frankenthal v. Wisconsin Real Estate Brokers'* Board, 89 N.W.
2d 825 (1958), the Wisconsin Supreme Court held that mimeographeil instruction for
renewal of brokers' licenses, providing that each member of a partnership must be
licensed in order for the partnership to be licensed, was a statement of policy of
"general application" and subject to declaratory review, even though it had not been
properly promulgated. The Court said:
When a party files an application for a license with an administrative
agency and the latter points to some announced agency policy of general
application as a reason for rejecting the application, such announced
policy constitutes a rule, the validity of which the applicant is
entitled to have tested in a declaratory action 89 N.W. 2d, 827.
The Wisconsin definition was materially identical to Connecticut's.
In Jezek v. Vordemaier, Fla., 227 So. 2d 69 (1969), a real estate broker who was
denied a renewal of his license because of late filing was held entitled to a declar-
atory judgment. Although the case turned upon a determination of whether the complain-
ant was in fact seeking review of the license denial or of the promulgated rule on
which it was based, the court in the course of its opinion spoke to the "general
applicability" of rules:
The term "rule "(authorizing a person to obtain a judicial declaration
as to the validity of any rule) was intended to apply only to a
rule or order promulgated by the agency in the exercise of its
quasi-legislative authority having a general application and which
uniformly affects the rights of the public or other interested
parties coming within the agency's jurisdiction. This is to be
distinguished from a "ruling" which is an order affected by the
agency in the conduct of a quasi-judicial proceeding which applies
only to the issues in that proceeding and affects only the parties
thereto...227 So. 2d, 72.
It appears possible, then, that the Department may avoid the rule characterization
entirely if the class upon whom requirements are to be imposed is small and well-
defined, or if the Department specifically limits the applicability of its final state-
ment to those individuals named in the proceeding. "General applicability" is in-
capable of being defined in ordinary language and has not been defined in case law;
if the Department can produce a sufficient number of specific determinants for setting
off each O&M class from other sources, it may convince the courts.
B. The Connecticut definition of "regulation," like the federal definition of "rule,"
refers to any statement that "implements, interprets or prescribes law or policy."
It thus embraces the clearly "legislative" or "substantive" rule at one end of the
spectrum, the "interpretative" rule at the other, and the vast taxonomic wilderness
between. What Davis terms the "troublesome distinction" between substantive and inter-
pretative rules does not directly concern the Department because the Connecticut APA,
unlike its federal counterpart, does not exempt interpretative rules from procedural
constraints. (Only the oral hearing is not mandatory.) However, the abundant case
-------
241
law that has developed respecting the distinction may be used against the Department
for purposes of classification; actions that have been called "interpretative rule-
making" may be similar in many respects to the proceedings contemplated for the
imposition of O&M requirements. While interpretative rules are generally analogized
to general counsel memoranda construing ambiguous statutes, Cooper notes that other
interpretative rules "describe the general discretionary policies to be followed by
the agency. For example, an agency given broad discretionary powers in respect to
the granting of licenses may formulate a statement of the conditions which must be
met in order to obtain a license," (Cooper, 175). But the disturbing implications of
this frustratingly unannotated observation may be avoided first, if the Department's
statement is held not to be generally applicable or second, if the statement may be
legitimately placed under the aegis of either rule or order, and the former is not
prohibitively controlling. In fact, if these implications can be avoided, Cooper's
observation may actually be advantageous for the Department because it classes
the delineation of conditions pursuant to a delegated discretionary power as an
"interpretative" as opposed to a "substantive"statement. This distinction may be
useful if the Department chooses to characterize its final product as a "declaratory
ruling."
C. A third significant feature of Connecticut's definition is its specific exemption
of "declaratory rulings issued pursuant to (s. 4-176)." The federal APA's correspond-
ing provision is the "declaratory order," which is not exempted from the definition
of "rule," but introduced in a separate section. It seems clear that the declara-
tory ruling was adopted at least in part to overcome the dichotomy between rules
and orders . Its possible use by the Department will be discussed below.
The Distinction between Rules and Orders.
A. "Order" is not defined in the Connecticut APA, but by implication it means at least
the final decision following a contested case. A contested case can mean "a pro-
ceeding, including but not restricted to ratemaking, price fixing and licensing...
in which a hearing is in fact held." The hearing may not be a rulemaking hearing,
but this does not necessarily mean that orders and rules are mutually exclusive,
as they technically are under the federal APA. If a contemplated action by an agency
may be considered both a rule and an order, may the agency choose which course to
pursue? Cooper says that it has such a choice and claims that the proper basis for
decision should be as follows:
Where an agency faces the alternative of proceedingJby rulemaking—^-
or by adjudication, the process of rulemaking should be utilized
except in cases where there is a danger that its utilization would
frustrate the effective accomplishment of the agency's functions.
Where such danger exists, e.g., where the "agency may not have had
sufficient experience with a particular problem to warrant rigidify-
ing its tentative judgment into a hard and fast rule," or where the
problem is so spe cialized or varying in nature as to be impossible
of capture within the boundaries of a general rule" (SEC v. Chenery Corp.,
332 U.S. 194, 202 and 203), the advantages to the agency of using the
ad hoc adjudication technique must be balanced against the possible
deleterious public consequences resulting from the retroactive applica-
tion of a new general standard of application to large numbers of
parties who have had no opportunity to be heard as to what the
standard is to be. Unless the balance clearly preponderates in favor
of the ad hoc adjudication method, the agency should utilize rulemaking
-------
242
procedures. (Cooper, 182). %
Even Davis, who with the federal APA is dealing with a stricter dichotomy, sees a
broad role for agency choice:
Often the best solution of the problem of classifying borderline
activities is to avoid classifying them - to skip the labeling and •
proceed to the problem directly at hand. Thus, if the problem is
to determine appropriate procedure for a particular activity, the
practical procedural needs may be studied without calling the
activity either rulemaking or something else; usually nothing will
be lost if the activity is regarded as borderline or mixed or un-
classifiable. (Davis, s. 5.01).
B. The U. S. Supreme Court has twice dealt specifically with the issue of agency
discretion to formulate policy through adjudicatory proceedings. In SEC, v. Chenery
Corp., 332 U.S. 194 (1947), the Court upheld a requirement by the SEC in the course
of approving a reorganization plan that preferred stock purchased by management could
not be converted into the common stock of a reorganized company. The SEC had issued
the same requirement a few years before in approving the same plan, but it had been
overturned by the Supreme Court on the grounds that the SEC's stated reason for
adopting the requirement, namely its interpretation of legal and equitable precedent,
was insufficient. On remand, the SEC reached the same result, but the reason put
forth this time was an interpretation of one of the securities statutes. Chenery
tried to argue that the second action was precluded as well because the SEC had not
promulgated a rule or regulation regarding management trading during reorganization.
The Court rejected the argument, holding:
Not every principle essential to effective administration of a
statute can or should be cast immediately into the mold of a
general rule. Some principles must await their own development
while others must be adjusted to meet particular, unforeseeable
circumstances. In performing its important functions in these
respects, therefore, an administrative agency must be equipped to
act either by general rule or by individual order. To insist
upon one form of action to the exclusion of the other is to exalt
form over necessity.... the choice between proceeding by individual,
ad hoc litigation or by general rule is one that lies primarily
in the informed discretion of the agency.
(IcL , at 202-03)
But the agency does not have complete discretion. In the same case, the Court warned:
Since the Commission, unlike a court, does have the ability to make new
law prospectively through the exercise of its rulemaking powers, it
has less reason to rely upon ad hoc adjudication to formulate new
standards of conduct....The function of filling in the interstices of ^
the pertinent legislation should be performed as much as possible ^l
through this quasi-legislative promulgation of rules to be applied
in the future. Id., at 202.
In NLRB v. Wyman-Gordon Co., 394 U.S. 759 (1969), the NLRB issued an order directing
Wyman-Gordon to furnish a list of names of employees eligible to vote in a representative
-------
243
election. The order was based on a rule laid down in an earlier adjudicated NLRB
case. The District Court held the order valid, but the Court of Appeals reversed
because it had been based on a rule not properly promulgated. Th'e Supreme Court
reversed the Court of Appeals, seven to two, but the majority was split on the
reason for reversal, four to three. The plurality of four said that while it
was improper to exercise rulemaking power in the former adjudicatory proceeding
(the Excelsior case) and that that purported rule was invliad, nevertheless the
order issued in the instant case had independent validity. The plurality, said in
the course of its opinion:
There is no warrant in law for the Board to replace the statutory
scheme with a rulemaking procedure of its own invention. Apart
from the fact that the device fashioned by the Board does not comply
with statutory command, it obviously falls short of the substance of
the requirements of the Administrative Procedure Act. The "rule"
created in Excelsior was not published in the Federal Register, which
is the statutory and accepted means of giving notice of a rule as
adopted; only selected organizations were given notice of the
"hearing," whereas notice in the Federal Register would have been
general in character; under the Administrative Procedure Act, the
terms or substance of the rule would have to be stated in the notice
of hearing, and all interested parties would have an opportunity
to participate in the rulemaking. (Id., at 764-65).
Justices Black, Brennan and Marshall concurred in the result but disagreed with
the plurality's reasons. Mr. Justice Black, in his opinion, found that the Board
in Excelsior properly followed the adjudicatory procedure rather than rulemaking:
Although it is true that the adjudicatory approach frees an adminis-
trative agency from the procedural requirements specified for rule-
making, the Act permits this to be done whenever the action involved
can satisfy the definition of "adjudication" and then imposes separate
procedural requirements that must be met in adjudication. Under these
circumstances, so long as the matter involved can be dealt with in a
way satisfying the definition of either "rulemaking" or "adjudication"
under the Administrative Procedure Act, that Act, along with the Labor
Relations Act, should be read as conferring upon the Board the authority
to decide, within its informed discretion, whether to proceed by rule-
making or adjudication. (Id. , at 772).
Wyman-Gordon did little more than to muddle the issue and to provide fodder for
both sides of the question. None of the opinions, including two dissents, suggested
overruling Chenery;~none attempted to spell out specific criteria for making"the
choice. But if a trend is present it is toward rulemaking. In a recent second
circuit case dealing with tl.e issue, Bell Aerospace Co. v. M-.RB, 475. F 2d 485
(1973), the court reversed an NLRB order recognizing 25 buyers as an appropriate
bargaining unit and mandating an election. Judge Friendly said that "if the state-
ments in the opinions oi the six Justices (plurality + two dissents) are to mean
anything, they must be read as requiring rulemaking here.... The Board was pre-
scribing a new policy, not just with respect to 25 buyers in Wheatfield, N.Y., but
in substance, to use Mr. Justice Douglas1 phrase, 'tc fit all cases at all times.1 "
But two additional factors seem to h.ive been important; in tipping the scales toward
rulemaking. The agency was reversing a long-standing policy to the contrary, and
it was the NLRB, with its "congenital disinclination" to follow the rulemaking
procedure.
-------
244
Three final observations ought to be made concerning the Supreme Court's position
on the issue. '
(1) If there is a trend toward requiring the rulemaking procedure to be used
in most istances, it is carefully qualified and anything but definitive.
(2) The authority of any federal decision favoring rulemaking is lessened by
virtue of the fact that the federal definition of rule refers to general
and particular applicability while Connecticut's definition of regulation
refers only to general applicability.
(3) Such authority is further circumscribed by the fact that the federal APA
defines "order" in part as what is not rulemaking; mutual exclusivity is not
a facet of Connecticut's definitions.
C. Several state courts have exercised the power to set aside agency orders as
invalid devices for avoiding the rulemaking process.
In People v. Cull, 176 N.E. 2d 495 (1961, New York), Judge Field^peaking for the
Court of Appeals, declared an order of the Traffic Commission fixing the speed
limit at 35 m.p.h. in a specific zone to be an improperly filed and published rule
and not binding, even though 35 m.p.h. signs were posted in the zone in question:
That the order of the State Traffic Commissioner here involved falls
in the legislative or quasi-legislative category can hardly be doubted.
In fixing a speed limit on a state highway, it quite plainly establishes
a general course of operation to be effective for the future and by that
token comes within the scope of the "rule or regulation" filing require-
ment of the Constitution. (Id., at 497)
In Josan Mfg. Co. v. State Board of Health, 133 N.W. 2d 301 (1965) , the court
held that a letter issued by the board}which provided that certain kinds of fittings
were necessary for public bathrooms, was a statement of general policy and therefore
a "rule" rather than an order. And in 1962 the New Jersey court reversed an order
of the division of alcoholic beverage control in the form of a letter to a whisky
seller forbidding him from using Mason jars as containers. The court said that
"detailed interpretations or applications of the statute" and regulations for the
future guidance of all persons who may be affected" should be properly published.
Proceeding by letter in such a case, it said "amounts to ad hoe legislation and a
simultaneous determination- of violation" thereof in a particular' situation". . .where
prior thereto the alleged transgression had not been covered or proscribed by ••'.-.
statute or regulation." The court proceeded on the principle that a "general
mandate, either statutory or administrative, must precede the specific violation."
Boiler Beverages, Inc. v. Davis, 183 A. 2d 64 (New Jersey, 1962).
Cooper notes that "in situations where it appears that a large number of persons
will be affected in substantially the same manner by the administrative decision
there is much to be said in favor of the utilization of rulemaking techniques."
(Cooper, 179). He cites as an example National Merchandising Corp. v. Public
Service Comm., 158 N.E. 2d 714 (New York, 1959), in which two phone companies
filed amendments which would have enabled them to limit advertising in telelphone
directories. "The Commission - perceiving that the interests of many phone companies
and many advertising agencies would be affected - on its own motion instituted
proceedings leading to the adoption of a rule of general application."
-------
245
It should be noted that in each of the cases involving a preference of rule to
order there has been a problem of notice or participation by affected parties.
In National Merchandising it might have been physically impossible to inform all
potential advertisers. Even in the rather bizarre Cull case, it is technically
true that lack of written publication could have prevented the motorist from
determining the validity of the particular speed limit. The Department is able
to define each class with sufficient precision; neither notice nor participation
will be a problem.
Cooper notes that the state courts have occasionally substituted the label "order"
for "rule."
Conversely, where a single party (or a small, well-defined group)
will bear the brunt of an administrative order, the adoption of
rule-making techniques may cause hardship to the individuals
affected. This is true because the adoption of such techniques
operates to deprive them of the advantages of an adversary type
hearing, and of the right to insist that the order be based on
specific findings of fact which in turn are supported by sub-
stantial evidence, and of the right to the broader scope of
judicial review available in cases involving adjudication. So
severe are these consequences that the state courts have oc-
casionally intervened, and insisted on the use of the con-
tested-case procedure. (Cooper, 180).
Unfortunately, the cases cited by Cooper involve only single parties, but the
reasoning may well apply to the reasonably large classes contemplated by the
Department.
D. There are no Connecticut cases dealing squarely with the distinction between
orders and rules. But there are cases lending indirect support. The Department's
opposition will be arguing that highly specific standards of the type to be im-
posed should be embodied in regulations, but it has been held that in instances
involving the public health and safety, the principle that regulations cannot be
too general may be relaxed. In State v. Vachom, 140 Conn. 478 (1953), the court
upheld the denial of a license to operate a hospital even though no specific
standards had been put forth. Judge Quinlan quoted from State ex rel, Altop v.
Billings, 79 Mont. 25, 35:
The principle requiring standards is subject to "the qualification
that where it is impracticable to lay down a definite or all-compre-
hensive rule, or where the ordinance relates to the administration of
a police regulation and is necessary to protect the general welfare,
morals and safety of the public it is not essential. . .that it pres-
cribe all the conditions upon which the license shall be granted or
refused." ( Id_. , at 484).
And in Forest Construction Co. v. Planning and Zoning Comm. , 236 A. 2d 917 (1967),
the court upheld the denial of a subdivider's plan even though that denial was not
based on precise formulated standards. The court said:
It is unrealistic to demand detailed standards which are impractic-
able or impossible.... As the complexity of economic and governmental
-------
246
conditions increases, the modern tendency is liberal in»
approving broad regulatory standards so as to facilitate
the operational functions of administrative boards or
commissions. (Id., at 923).
In the same case, the plaintiff appealed on the basis that it was not present at
the time of the decision and had received no notice thereof, though it had met
with the board informally on previous occasions. The court denied this ground
as well, saying:
Although the requirements of substantial justice must be
followed, strict and technical rules of procedure need not
be enforced.... Due process deals with matters of substance
and the reasonableness of the conclusion of the commission
is apparent from a review of the evidence before it. The
plaintiff had notice of and was fully aware of the issues
with which it was confronted. It had a full opportunity
to meet these issues at the series of meetings which its
representatives attended. There is no showing of error
or prejudice so as to constitute a denial of due process.
(Id., at 922).
The Declaratory Ruling Option
A. The Connecticut definition of "regulation" specifically exempts "declaratory
rulings issued pursuant to section 4-176." Declaratory rulings are the state
counterparts to the federal declaratory order. The use of either has been sur-
prisingly infrequent, and the most authoritative pronouncement on their applic-
ability and effect was in 1956, in the case of Frozen Foods Express v. United
Stages, 351 U.S. 40 (1956). After an investigation and hearing institutued on its
own motion, the I.C.C. listed a large number of specified commodities which it
had found to be non-agricultural, and hence not exempt from the requirement of
a certified of public convenience. The hearing was a public one at which various
producers and carriers presented evidence, and the Commission's decision was in
the form of an order. Frozen Foods, not a party to the proceeding, brought
suit to have it set aside. The District Court said the order was not binding
and therefore not subject to judicial review, but the Supreme Court, in an opinion
by Mr. Justice Douglas, reversed, saying that the "order" of the Commission "warns
every carrier, who does not have authority from the Commission to transport those -
commodities, that it do.es so at the risk of criminal penalties. Where unauthorized
operation occurs the Commission may proceed administratively and issue a cease
and desist order....The Determination made by the Commission is not therefore
abstract, theoretical or academic." The Court then proceeded to label the statement
itself: „,„
- .* rf
The "or3er" of the Commission is in substance a "declara-
tory one...which touches vital interests of carriers and
shippers alike and sets the standard for shaping the manner
in which an important segment of the trucking business may
be done." (Id., at 44)
-------
247
According to Davis, "the dissenting view of Mr. Justice Harlan that the order should
not be reviewed because it 'nowhere commands1 has not won support."
i
A declaratory order, then, is both binding and reviewable. But because it has been so
seldom used, the question of how detailed or "substantive" it may be has not been
squarely faced. The federal APA provides that it may be issued "to terminate -a contro-
versy or remove uncertainty," and Davis obliquely suggests that this makes it roughly
equivalent to a temporary legislative rule:
"Agencies having the power of legislative (as dis.—
tinguished from interpretative) rulemaking may certainly
render a declaratory order which will be binding on the
agency until the agency announces a new ruling or rule;
that is, the agency may give assurance that any new
ruling or rule will not have a retroactive effect,...
The distinction between legislative and interpretative
rules is necessary because only an agency having a power
to make legislative rules may issue a binding ruling."
(Davis, S. 50, 1951 ed.)
Elsewhere, Davis claims that any statement which is a product of an adjudication and
does not "command" (even though it is binding) is a declaratory order. Davis' samples
include "issuance of a certificate of convenience and necessity, issuance of a license,
approval of a rate increase, approval of a merger or reorganization, the denial of
any of the foregoing, and the denial of a cease and desist order." Nonetheless, very
few statements from federal agencies have been characterized as declaratory orders, and
of those that have, none has been as detailed as the listing of non-agricultural prod-
ucts in Frozen Foods, supra.
State counterparts to the declaratory order (usually termed declaratory rulings) are
also infrequent and are usually interpretative in the ordinary sense of the word.
(A statute or a regulation will be held applicable or not applicable in a narrowly
defined situation.) See Aizen v. Penn. Pub. Util. Comm., 60 A 2d 443 (Penn., 1948);
Wisconsin Fertilizer Ass'n v. Karns, 158 N.W. 2d 294 (Wise., 1968); Pacesetter v.
Village of Olympia Fields, 244 N.E. 2d 369 (111., 1968). The only state case suggest-
ing broader declaratory powers is Knudsen Creamery Co. v. Brock, 234 P. 2d 26 (Cal.,
1951), in which the court upheld an order establishing minimum prices to be paid by
distributors for milk according to established marketing areas. Here, however, the
order, which the court called "legislative in character," was specifically sanctioned
by statute.
But if there are no directly supportive cases, neither are there any_decisions -limit----
ing the specificity of a declaratory order or ruling. Precedents suggest that the
declaratory ruling is interpretative in character. And Cooper includes the formulation
of_discretionary policies among interpretative acts (Cooper, 175). It is true that
Cooper in that context was distinguishing substantive from interpretative rules, but
that is precisely what a declaratory ruling appears to be — an interim interpretative
rule.
B. Assuming that a declaratory ruling may be as detailed as the Department desires,
what effect will it have in Connecticut? Davis contends that agencies may issue declar-
atory rulings irrespective of statute, as an incident to the power to make legislative
rules. Moreover, he claims, these declaratory rulings may have "just as much binding
-------
248
effect on the agencies, on the parties, and on the courts as any other order.1' (David,
s. 4.11). The only state case in support of this position, however, is Electrolux Corp.
v. Miller, 0 36 N.E. 2d 633 (N.Y., 1941), which held valid a determination by the
Industrial Commissioner that sales supervisors were "employees" within the meaning of
a certain labor statute:
Though we agree that the statute does not, in express
terms or by implication, confer upon the Commissioner
power to make advisory or declaratory decisions de-
fining obligation arising under statute...it leaves
room for the exercise of discretion by the Commissioner
charged with responsibility for its administration and
in the exercise of that discretion the Commissioner
may make rules and orders which are immediately effect-
ive or part of a reasonable procedure for the perform-
ance of duties imposed by law.
(IcL , at 636)
On the face of this one case, however, is the Report of the Attorney General's Committee
on Administrative Procedure (1941), where it is asserted on page 31 that "without
statutory authority an administrative agency is powerless to render a binding declara-
tory ruling." And once a state has enacted a declaratory ruling statute (as Connect-
icut has), it may by implication limit any "incidental powers" existing beforehand to
its own terms.
If section 4-176 provides the sole authority for the issuance of declaratory rulings,
it provides one minor advantage and one major disadvantage for the Department. The
advantage is that it is not limited like the federal version to the termination of
a controversy or the removal of uncertainty, which imples the existence of a bona fide
prior dispute. It simply says that "each agency may, in its discretion, issue declara-
tory rulings as t^q the applicability of any statutory provision or of any regulation or
order of the agency."
The disadvantage is the final sentence, which appears to limit the effect of rulings
not issued in response to request. "Rulings disposing of petition have the same status
••35 agency decisions or orders in contested cases." One interpretation hinges on the
negative pregnant kind of argument and suggests that rulings not disposing of petitions
— i.e., discretionary ones — have only an advisory opinion effect. But another inter-
pretation is that the final sentence is the result of a drafting oversight. The 1971
version of section 4-176 provided only for declaratory rulings disposing of petitions.
The 1973 amendment added "in its discretion," which arguably not only made the rulings
non-mandatory but allowed them to be internally generated. If so, the final sentence,
instead of remaining unchanged, should have eliminated the limiting words "disposing
of petitions." Otherwise the amendment would be giving an agency something it always
had -- the power to issue advisory opinions.
There are no Connecticut cases directly in point. But in Hardware Mutual Casualty v. Prem
153 Conn. 467 (1966), the court found a preliminary rate bulletin issued by the Insur-
ance Commissioner to be legal but not binding because couched in terms of a 'preliminary
guideline.' The court did not find it necessary to address the issue directly, but the
briefs on both sides assumed that had it not been characterized as "informal" and "pre-
liminary," it would have been illegal and unenforceable. Thus, Davis' argument that no
statutory authority is necessary will probably have difficulty passing, and reliance for
the validity of a declaratory ruling will probably have to be placed in section 4-176.
-------
249
Conclusion '
The Department would do best to frame its O&M requirements impositidn in terms of an
ordinary order built around an adjudicatory proceeding. If this is successfully
challenged, it can fall back upon the less likely but possible characterization of
declaratory ruling. The regulation should specify as many general criteria as possible,
and for purposes of an interpretative characterization, should include the phrase
"in the discretion of the Department."
-------
250
O&M REQUIREMENTS: SANCTIONS AVAILABLE TO HEARING OFFICERS
There are two kinds of sanctions which a hearing officer
might wish to impose upon a source who either fails to keep or
tampers with required monitoring information:
(1) He could create an adverse inference arising
from such failure; or
(2) He could restrict the scope of admissible
evidence available to the source.
The adverse inference option will probably succeed in the
event that the monitoring data has been destroyed. Its potential
where the source has never kept the information is much weaker.
Case law suggests that for an adverse inference to have effect,
the Department must first present a prima facie case. In a
number of foreseeable situations this will not be possible. This
will be a formidable barrier unless, through an analogy to the
destruction of evidence inference or a policy argument urging
effective admininstrative action, the courts can be persuaded
to allow the inference itself to constitute a portion of the
Department's prima facie case.
To restrict the scope of admissible evidence for the source
in the event of his failure to produce information may be to run
afoul of the open evidentiary policy of the Connecticut A.P.A.
A voluntary agreement to this effect, however, remains a distinct
possibility.
-------
»/ SUGGESTION COMMITTEE SAYt Impreva Your Own Condition; Eom Co«h ond Recognition; Send In a Sugg»«tlonl
Inlerdepartment Message
STO-201 REV.3/74 STATE OF CONNECTICUT
(Stock f/o. 6938-051-01)
251
SAVE TIME: Handwntttn mesicgtt *rt,
Utf utrbon if you rully nttd » copy, // lyptu/ritttn, ignort fiint Unit.
To
Front
NAME
Bill, r»<->p, * Pmi£
AGENCY
NAME
Bob Hosteller
AGENCY
TITtE
DATE
Mar. 13. 197*
ADDRESS
TITLE
TELEPHONE
ADDRESS
SUBJECT
Legal Sanctions Available to PEP Hearings Officer for Either
Failure to Keep or Tampering With Required Parameter Monitoring
Information : ;—
I/ Statement' of Issues --.... -
The basic inquiry dealt with in this memo is the nature of
legal-sanctions-4*hich .a. DEP, hearings officer can impose, on^a.
source that fails~to~leeep~reeen..coyeredjbxjbhe_mpnitojrin^da^a but__not_
supply substantive evidence -on-that—point-,—i-«-e«—not—go to the
SAVE TIME: // convenitnt, banJuritf reply to itndtr on this s*m* tbett.
-------
252
establishment of a prima facie case. (b) It may diminish the
weight to be given to the entirety of the sources' case but not
contribute to the prima facie case. (c) This inference may itself
constitute part of the Department's prima facie case. (d) Absence
of monitoring data may authorize the use of, and may strengthen
the impact of, more indirect proof of violation. (e) Such actions
may by themselves constitute sufficient cause to decide the issue
against the source.
The second strategy is to restrict the source (with advance
notice) to certain specific types of evidence. In this situation
the source would have the option of producing either monitoring
evidence or other suitable documentary evidence. Furthermore,
this device could be combined with the requirement of record
keeping. Under all formulations, this second device would mean
that if the Department established a prima facie case and the
source failed to produce the designated information, it would lose.
-------
253
II Conclusion
An adverse inference under Connecticut law is generated when-
ever a party which has evidence in its possession that should be
probative on the issues before the court fails to introduce that
evidence at hearing. The inference, if generated, at least affects
the strength of the party's case against which it is raised and may
be considered to constitute substantive evidence. Two aspects of
the adverse inference rule arising from failure to introduce evidence
present problems for its use by the DEP hearings officer in the situa-
tion where monitoring evidence is not kept as required. First, the
traditional judicial formulation of this rule only applies when the
evidence is available at the time of trial. Second, the inference
does not arise until a prima facie case has been generated by the
party seeking to utilize the inference and cannot itself count as
substantive evidence going to establish that prima facie case.
Case law on destruction or spoliation of evidence is much more
helpful for our problem. By definition, such evidence is not avail-
able at trial, and there are cases which indicate that specific under-
standing or notice that the information will be useful in the upcoming
hearing will be sufficient to create a foundation for the adverse
inference if such evidence is lost or destroyed. Furthermore, tamp-
ering with or altering evidence to be used at the hearing presents
the clearest case for the use of the adverse inference. In spite of
the clear availability of the inference in the case of destroyed
evidence or (if the analogy is accepted) a refusal to keep such data
when required to do so, the weight of case law in other jurisdictions,
there being no Connecticut law on this issue, indicates that a
prima facie case must be established before the inference arises.
-------
254
The necessity of using tools such as the adverse inference to
protect the administrative process and administrative dependence on
information gathering by regulatees gives strong support to the
relaxation of both the prerequisite of a prima facie case and the
requirement that the evidence have been produced at one time and then
either destroyed or withheld at trial. However, the Connecticut APA
affects this argument. It strongly supports the right of the agency to
use its experience to inform the evaluation of evidence but seems morg_
narrowly to confine the agency in its efforts to substitute expertise
and experience for evidence itself. As I analyze the problem confront-
ing us, extending the inference to cover cases where required records
are never generated7 is supported by the policy supporting administrat-
ive effectiveness and is permitted under the APA. On the other hand,
extension of this tool to the situation where a prima facie case had
not been established, while receiving policy argument support, runs
afoul of the APA's restriction of agency expertise as a substitute
for evidence. Only official notice can be used to effectuate this
substitution and I am afraid that agency expertise does not give
much support to this extension, which is the type of process for
which courts seem to possess even more expertise. There remains
some hope, however, that the necessity of using 'this device to
protect the administrative process will be accepted. Logic and
analogy to sanctions imposed for refusal to abide by discovery orders
support our position, but unfortunately I am skeptical that the
conservative Connecticut Supreme Court will agree.
My conclusion is therefore that the prima facie case prerequisite
remains as a barrier, but through analogy to the destruction of
evidence adverse inference, through support from a policy argument
-------
255
designed to support effective administrative action, and by sympathetic
APA treatment, we can use this inference even though the information
was never generated. Nevertheless, it must be noted that the circum-
stances giving rise to this failure to keep the monitoring information
must logically support the conscious avoidance by the source of the
production of information adverse to its position; something more than
negligence and inadvertence must be shown, and the Department should
make its position as strong as possible by clearly informing and con-
tinually reminding the source of the consequence of its actions.
I remain very fearful of the mechanism of restricting the types of
evidence the source can introduce at trial. It appears to conflict at
least with the basic spirit, if not the precise letter, of the APA in
its support of the broadest possible right of the^regulatee to intro-
duce evidence in support of its case. Furthermore, I am unable to find
precedent for this practice without statutory authorization. Finally,
I believe policy arguments backing our position are weak since we seem
by this procedure only to be preventing the finder of fact, which is here
judge-like figure rather, than "an easily misled jury," froirr hearing
all the evidence and weighing it according to its proper; value and
the credibility of witnesses.
Unless closely analagous practice can be found, I would advise
against restricting the types of evidence presentable at hearing by
official action. I believe there is much legal risk.My conclusion,
however, says little about "voluntary" agreements to accomplish this
same purpose, and they remain a possibility.
-------
256
III. The Adverse Inference
A. JudicialTreatment of Failure to Testify or Produce Other
Evidenceat Trial
1. General Statement of the Rule
Wigmore states the general proposition as follows:
The failure to bring before the tribunal some
circumstance, document, or witness when either
the party himself or his opponent claims that
the facts would thereby be elucidated serves
to indicate, as the most natural inference,
that the party fears to do so, and this fear
is some evidence that the circumstance or doc-
ument or witness, if brought, would have exposed
facts unfavorable to the party. These inferences,
to be sure, cannot fairly be made except upon
certain conditions; and they are also open
always to explanation by circumstances which
make some other hypothesis a more natural one
than the party's fear of exposure.
2 Wigmore on Evidence, I 2&5 (3d ed. 1940).
Connecticut courts adopt this general formulation:
It is certainly a maxim that all evidence
is to be weighted according to the proof which
it was in the power of one side to have produced,
and in the power of the other to have contradicted,
Cupo v. Royal Ins. Co., 101 Conn. 5#6, 592, 126J A. 344 (1924)-
2. Requirement of Erima Facie Case as a Precondition of
the Inference
However, as applied in this state the inference does
not arise until the burden of.producing evidence has shifted
to the defendent.
It is not applicable until the plaintiff has
first made out a prima facie case. The infer-
ence drawn from the failure to testify does :.
not supply the place of evidence of material
facts and does not shift the burden of proof
so as to relieve the party upon whom it rests
of the necessity of establishing a prima. facie
case, although it may turn the scale when the
evidence is closely balanced.
------- OCR error (C:\Conversion\JobRoot\000002P9\tiff\20006XJY.tif): Unspecified error
-------
258
duty to have that evidence available, or some responsibility
for its absence, no substantial logical inference arises that
the evidence is not being produced because of the party's con-
sciousness that it is unfavorable.
Given this last aspect of the adverse inference rule we are
left with a partial analogy for generating an adverse inference
from the fact that monitoring data does not exist as required.
Two major difficulties remain. First, we must, as a prerequisite,
establish a prima facie case, which the absence of data may make
very difficult. Second, the traditional judicial formulation
requires that the evidence exist at the time of hearing. However,
I believe the theory of the second requirement gives us hope for
overcoming it in circumstances which generate the underlying
logical inference, i.e. where circumstances point to a realization
by the non-producing party that the evidence would be damaging.
B. Judicial Treatment of Spoliation or Destruction of Evidence >
1. Circumstances Creating the Inference
The destructionor spoliation of evidence, which if available
at the time of trial is of the type which would generate an
adverse inference, itself will create an adverse inference under
proper circumstances. "Proper circumstances" are those which
as a logical matter "manifest bad faith" and a "consciousness
of a weak case." Therefore mere negligence which results in the
destruction of evidence is not enough to create the inference.
McCormick on Evidence I 273 (2nd ed. 1972).
The type of records and their general importance or the
»
presence of specific realization or notice by the party of their
importance can by itself create this set of circumstances. In
Rosen v. U.S., 15 Am.Fed. Tax Reports 501 (D. Minn. 1926) the
mere fact that books of account for a business were missing
-------
259
generated the inference in a tax recovery case. The judge
found the plaintiffs to be intelligent businessmen who must
have been aware of the general importance of the retention of
these records for many purposes. Under these conditions
[i] f, within a short time after they have
been in use, they are destroyed or missing^
that is a circumstance which carries with it
a very strong presumption that if produced,
they would be against the interest of those
who have been responsible for their conven-
ient loss.
Armstrong v. Belding Bros. & Co. 280 F. 395, 39# (D. Conn.
1922), a federal patent case arising in Connecticut, presents
the most typical factual setting .for this inference.
The destruction, during the pending of the
action of books and records of the defendant,
which, as the defendant must have known, might .
have a material bearing on the question involved,
if the plaintiff's contention was ultimately
sustained, was a circumstance requiring explan-
ation on the part of the defendant ....
Weinninger v. U.S. -234 7. Supp 499 (D. Del. 1964) pro-
vides .by far the closest analogy ,-t,o the factual pattern^we r
anticipate. -That case involved -the death of the pilot of a
private plane as a result, according to the Court-1 s finding,
of air turbulence created by U.S. Air Force training operations.
The day following the accident, decedent's brother notified
the Air Force Commander by phone that he had witnessed the
crash, had seen Air Force planes in the area, and felt them
responsible. Subsequent to that communication the Air Force
destroyed as part of "' normal records disposition'" slips
containing records of the number of practice instrument approaches
made the day of the accident. In creating an adverse infer-
-------
260
ence on the issue of whether the turbulence was produced by
a training rather than an "operational" flight the court
stated:
Notwithstanding that [the base commander] was
thus forewarned that the responsibility of
the Government for the accident might be
asserted, the "approach control arrival slips"
containing vital statistical information were
destroyed. Under the circumstances, it must
be presumed that if they had been retained, as
they should have been, their revelations would
not have been helpful to the Government.
Weinninger v. U.S., supra, 234 F. Supp. at 50&.
It appears to me that the facts of this case are relatively
supportive of the inference we wish to create. The Air Force
as part of its regular program of "'records disposition,1" but
after notice of their potential importance destroyed records
important to issues raised in the case. Neither "consciousness
of a weak case" as evidenced by overtly suspicious actions nor
destruction of evidence during the pendency of the case were
noted by the judge in his ruling. The critical factor appears
to be simply the clear notice-of the potential importance of
this data and the failure of the base commander to alter his
information systems to accommodate this anticipated need for
evidence.
2. Effect of the Inference
At the minimum, the inference diminished the weight to be
given the party's evidence or the point to which the destroyed
evidence would have gone, and spoliation under circumstances
indicate fraud or obstruction of justice has this impact on
the entirety of the party's case. 2 Wigmore on Evidence
supra II 273, 2&5, 291; McCormick on Evidence, supra I 273;
Sribs Aktieselskapet Orenor v. The Audrey, l&LF. Supp. 697
------- OCR error (C:\Conversion\JobRoot\000002P9\tiff\20006XK2.tif): Unspecified error
-------
262
to comply with a discovery order or which makes "false and mis-
leading" answers. Rule 37» Fed. Rules of Civil Procedure; Conn.
Practice Book I 172. In addition to the default remedy the federal
rules allow for a flexible response to refusals to allow dis-
covery including limiting of other evidence which may be intro-
duced by the party at fault, striking defenses, and taking
alternative facts as true. It may be the case that the Connecticut
Courts'have this same power under its authority to "impose such
conditions as it deems suitable" in setting aside a non-suit
for refusal to allow discovery. Conn. Practice Book 1 172.
The major difference between the remedies under these
court rules and the problem of inadequately- kept or altered
monitoring information is that in the former case the party has
had a chance to challenge the legitimacy of the requirement in
the hearing to compel discovery. Given this fact the inference
of consciousness of a weak case is almost compelled by the refusal
to submit to the order and at the same time the authority of
the courts is challenged with the resulting need to fashion a
sufficient penalty for refusing to comply. Whether the necessity
of protecting the administrative process justifies creation of
similar sanctions is dealt with in the next section.
D. Special Features of Administrative Agencies
1. The Connecticut APA
The Connecticut Administrative Procedure Act states in
relevant portion: ,
Findings of fact shall be based exclusively on
the evidence and on matters officially noticed.
-------
263
[N]otice may be taken of judicially cognizable
facts. In addition, notice may be taken of
generally recognized technical or scientific
facts within the agency's specialized knowledge.
.... The agency's experience, technical com-
petence and specialized knowledge may be
utilized in the evaluation of the evidence.
Conn. Gen. Stat. Annotated 1 4-17#(4)
My reading of these sections, as informed by Cooper,
State Administrative Law (1965)»lends strong support to the
position that the adverse inference can only go to the weight
of the evidence and cannot stand as substantive evidence on
the issue in question. This would also indicate that the admin-
istrative agency, assuming it bore the initial burden of intro-
ducing evidence, would still-be:required to establish a prima
facie case before it could benefit from this inference."
My conclusion flows from the following interpretation of
the statute: First, only evidence and matters officially
noticed count as proof. This means that if the inference were
to be given substantive effect-in Connecticut Courts, it.could_
be so treated under administrative procedures; otherwise it
must be officially noticeable-or .Jiot count as proof. Second,—
the creation of substantive evidence from failure to keep
records or tampering with records does not appear to be the
type of endeavor generally included within the expanded notice
. of capabilities of administrative agencies for "generally
recognized technical or scientific facts." It is true that the
logical inference of consciousness of guilt is of the pro'per
type of general fact capable of specialized judgment by a
legislative body rather than an "adjudicative" or litigative
fact (See Cooper, State Administrative Law, supra Chpt. XII,
-------
264
Sect. 5)*But the administrative agency appears no more competent
these facts than the courts, and the courts have decided not to
give the evidence substantive weight.
Third, however, in evaluating the evidence, the agency is
allowed to utilize its "experience, technical competence and
specialized knowledge." In discussing this phrase, Cooper draws
a clear distinction between this process of interpreting the
evidence and drawing conclusions therefrom as part of the process
of decision and the process of proof where there are tighter
restrictions in substituting agency knowledge for proof.
Cooper, State Administrative Law, supra« Chapt. XII, Sect. 5
(c)(7)» The law recognizes the special ability of agencies to
evaluate evidence, and there appears to be some clear logical
justification for the argument that the agency has special exper-
ience with the required record keeping program and should be
allowed to use that experience to create an adverse inference
from a failure to keep records-or from tampering with them,
given proper warning and a failure to explain adequately by the
source. Logic and the Administrative procedure Act would seem
to support this minor extension of judicial doctrine to the
situation where the evidence was never generated or was altered
long before the hearing began. I admit to some uncertainty
here but feel it is minor.
Special Need to Utilize this Tool to Protect the Integrity of
the Administrative Process
In International Union (UAW) v. NLRB, 459 F. 2d. 1329
(B.C. Gir. 1972) the court required the Labor Board to apply
the adverse inference for refusal of an employer to produce
-------
265
subpoenaed records. In discussing that subpoena the court
stated:
Moreover, the adverse inference rule plays
a vital role in protecting the integrity of the
administrative process in cases where a subpoena
is ignored. It is, of course, always possible for
the opposing party to seek enforcement of the sub-
poena in court. But enforcement against a really
intransigent party can be costly and time consum-
ing, particularly in administrative proceedings
where the enforcement process is of necessity
collateral to the main case, [citing cases]
The adverse inference rule allows a tribunal to
attach weight to a party's intransigence without
resorting to the awkward enforcing process. It
permits vindication of the tribunal's authority
in situations where vindication might, as a
practical matter, be impossible otherwise ....
459 F. 2d at 133&-39.
The above reasoning lends significant support by analogy
to the use of the adverse inference to protect the strong agency
interest in collecting information to be used as part of the
decision process. Furthermore, this argument suggests that the
availability of a civil penalty for failure to gather this
information"does not prohibit *he .use of this-device :since it,
like the enforcement of the subpoena, may be inadequate for
administrative purpose involved. Information can be Tid-thheld
from the adjudicative body either by failure or refusal to
produce that which is available or by a refusal to generate
such information in the first instance. On a policy basis
the adverse inference should be available to both where the
facts of the case support the logical inference that failure
to generate useful information reflected a consciousness of
the-probably adverse content of that data.
-------
266
On the basis of the above discussion, I believe that extending
the adverse inference to a failure to generate required infor-
mation is a rather safe move legally even though the case law
goes only to situations where the evidence is available at the
time of trial or has been destroyed under questionable circum-
stances. The requirements of workable administrative procedures
support this extension and the APA, with its favorable treatment
of the use of the "agency's experience" in evaluating evidence,
presents little in the way of an obstruction.
As I have argued above, extension to the situation where
a prima facie case has not yet been generated appears to be
more questionable under the APA since it falls into the more
restricted area of generating, rather than evaluating, evidence
from the agency's experience. An argument can also be made
that the legislature by authorizing civil penalties for a. failure
to keep this information demonstrated conclusively, in the absence
of authorization of other sanction, its intent as to the appropriate
remedy. Nevertheless, a. strong argument remains that the adverse -
inference is necessary to protect the integrity of the adminis-
trative process and its dependence on information gathered by
regulatees themselves. Unless the inference is available as
part of the prima facie case, the argument goes, a determined
' violator can deny the agency the foundation of the inference
and can thus limit its liability to the relatively small pen-
alties available for procedural violations ($1000 and $100/day
maximum).
Whether this policy argument will be strong enough to per-
-------
267
suade a court that the inference may be extended by an agency
in administrative proceedings beyond its limits under judicial
treatment is unclear to me. Since I see no reason to write
this extension into regulations and would argue for its use
in an ad hoc fashion as part of the administrative hearing,
a ruling against us on appeal would not be terribly costly as
it would only affect the single case under appeal. How difficult
it will be to establish a prima facie case remains an important
unknown to me, which may provide the most productive area for
development in solving the present problem.
-------
268
IV Restricting Types of Proof Admissable at Hearing
A. Formulation of the Administrative Mechanism
This mechanism might take one of too forms. First, there would
be no requirement of record keeping, but the source would be notified that
if a violation were determined to exist at any time only certain specified
types of information would be admissible at the hearing on the issue of
whether the violation was continuing. Second, keeping records would be
required and there would be notice to the party that only the required
evidence would be admissible at the hearing. Note that I am only examining
here the question of whether the agency may by official act (either in the
regulations or ad hoc at.hearing) restrict the type of evidence introduced
at hearing. I am not dealing with the issue of whether the burden of proof
or persuasion can be shifted.
B. Policy Discussion
I believe at a policy and administrative feasibility level the
first of these formulations has real drawbacks. The major component of
this problem is that without the requirement of record keeping, assuming
an inability to shift the burden of going forward with the evidence to
establish a prima facie case - (which I believe to be a fact of the situa-
tion), this mechanism gives us nothing, in many cases, with which to make
out our case. At a policy level, if we are satisfied that the data we
are requiring is of high enough quality to be useful, we should want to
• require it for the purpose of identifying problems to ourselves and to
conscientious sources. The second formulation helps us generate, for
cases where the requirement is complied with, information from which the
prima facie case can be generated. Where no data is kept, like the adverse
inference, this mechanism does not help us establish the prima facie case.
(Whether we can do this by some mechanism similar to burden shifting seems
to me to be unconnected to this device.) However, if the information is
-------
269
not available and the prima facie case is generated, the source will auto-
matically lose; it can introduce no defense.
C. Similar Mechanisms Utilized by Federal Agencies
Both Social Security and Internal Revenue have regulations which
require introduction of specific types of evidence in order to establish
a claim. For IPS the best example is the substantiation requirement for
travel and entertainment expenses as business expenses. Unless detailed
records of the specified type are submitted, the deduction will be dis-
allowed. See Tres. Regs. Sec 1. 162-17. Under the Social Security admin-
istrative bureaucracy,-there are a number of evidentiary requirements for
establishing entitlement to benefits. See 20 CFR Sees. 404.701 - 404.728,
"Subpart H - Evidence."
There are, however, two distinctions between these administrative
mechanisms and ours. The first of these is that under the Federal APA and
administrative law in general, the burden of proof and persuasion rests
on the party seeking-to establish his rights to benefits. This means --
that evidence need not be required in order to establish a. prima facie
case. This distinction is of interest to us in that it destroys any support
by analogy that a sijmple designation of types of evidence unaccompanied
by a record keeping requirement would receive.
The second distinction is much more critical. Both of these
mechanisms as utilized by the agency and incorporated into administrative
regulations are authorized by statute. (42 U.S.C.A. 405(a) for Social
Security and 26 U.S.C.A. 274(d) for Internal Revenue.) We have no such
specific statutory authority, and I can find no general support in the
Connecticut APA. In fact, as will be discussed in the next section, I
interpret the general thrust of the states Administrative Procedure Act
to be antagonistic to this procedure.
-------
270
D. Restricting Evidence under the Connecticut APA
The Connecticut APA provides: "Opportunity shall be afforded all
parties to respond and present evidence and argument on all issues in-
volved." Conn. Gen. Stat. Annotated Sec. 4-177 (c). With respect to
officially noticed material the act states that parties "shall be afforded
an opportunity to contest" any noticed material. Conn. Gen. Stat. Ann-
otated Sec. 4-178(4).
These two provisions reflect a strong bias in the act for affording .
parties the due process right of a full hearing complete with an opportunity
to contest all issues with evidence of their own. .Cooper's, discussion of
this section contains numerous cases where agency determinations were over-
turned because failure to provide adequate opportunity either because of
formal short-cutting of the hearings process or because of the exclusion
of evidence the court took to be relevant. Cooper, State Admin. Law, supra,
Chpt. XII, Sec. 2(e). While none -of these cases are on point with our
factual situation, they do indicate the agency should tread carefully,
when it restricts the right to produce evidence * The section on official
notice strengthens this general -impression. The opportunity given here
to refute noticed matters is broader than the right afforded by courts
in judicial notice and agency determinations have been routinely over-
turned for violations of this requirement. Cooper, State Adm. Law, supra,
Chapt. XII, Sec. C(3) and C(5).
The one section of the act which allows for exclusion of evidence
directly gives us little support.
Any oral or documentary evidence may be received, but the
agency shall, as a matter of policy, provide for the ex-
clusion of irrelevant, immaterial or unduly repetitious
evidence.
Conn. Gen. Stat. Atmotated Sec. 4-178(1). I cannot see how the restric-
-------
271
tions we would like to impose fall within this provision. And given that
this is the only explicit provision on exclusion, an argument may be made
that the type of exclusion we desire is impermissible unless explicitly
authorized by statute.
E. Conclusion
I find the approach of limiting the source in the types of evidence
it may introduce very shaky legally. It has the definite appearance of
denying due process and receives no support in the applicable statutes.
Finally a court may argue, and I feel may do so rather persuasively, that
the restriction serves little purpose. As a fact finder, the hearings
officer would seem to be able to receive all evidence, evaluate its in-
herent value under the other types of evidence potentially available (the
adverse inference), and judge the demeanor and credibility of witnesses.
Other than the slowing down of hearings, which can be remedied by the ex-
clusion of "irrelevant, immaterial, or unduly repetitious" evidence, the
proceeding is little harmed by allowing in "too much" evidence. On the
other hand, the agency would seem to bear a heavy burden if the source
failed for some marginally questionable reason to generate the data but
stood ready to introduce evidence which the hearings officer would have
considered highly credible. (I am certain the appellate court will be
informed as to how credible this evidence was.) I believe the hearings
officer must stand ready to hear this evidence, but retains a substantial
power to evaluate that evidence. If it is of the "wrong type"
but the hearings officer would believe it under all the circum-
stances, I have difficulty understanding why he should be denied that
opportunity. Of course there are situations where restricting evidence
might be desirable, but I believe the agency should bear a heavy burden
in justifying that restriction.
-------
272
APPENDIX A
THE ENFORCEMENT ACT
-------
273
Substitute Senate Bill Ho. 1973
PUBLIC ACT HO. 73-665
1H ACT CONCERNIHG THE EHFOBCEHBHT AUTHORITY OF THE
COMMISSIONER OF EHflROHHEHTAL PROTECTION.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. (NEW) (a) Any person who
knowingly or negligently violates any provision of
section 14-100b or 14-100c of the 1971
noncumulative supplement to the general statutes,
subdivision (3) of subsection (b) of section 15-
121 of the 1971 noncumulative supplement to the
general statutes, as amended by number 91 of the
public acts of 1972, chapter 348 of the general
statutes, as amended, sections 19-507, 19-508, 19-
513a, 19-514, or 19-519, of the 1971 noncumulative
supplement to the general statutes, section 19-517
of the 1971 noncumulative supplement to the
general statutes, as amended by section 4 of
number 103 of the public acts of 1972, section 19-
519a of the 1969 supplement to the general
statutes, section 1 of number 103 of the public
acts of 1972, sections 19-524b, 19-524c, 19-524g,
19-524n, 22a-5, 22a-6 or 22a-7 of the 1971
noncumulative supplement to the general statutes,
section 5 of number 155 of the public acts of
1972, sections 25-2, 25-4a, 25-4d, 25-4e, 25-«f,
25-7a, 25-7b, 25-7d, 25-7e, 25-8a, 25-8c, 25-10,
25-11, 25-12, 25-15, 25-26, 25-26a, 25-27, 25-54c
to 25-541, inclusive, or 25-54aa, of the 1971
noncumulative supplement to the general statutes,
25-54CC of the 1971 noncumulative supplement to
the general statutes, as amended by section 1 of
number 252 of the public acts of 1972, 25-54dd of
the 1971 noncumulative supplement to the general
statutes, 25-54ee of the 1971 noncumulative
supplement to the general statutes, as amended by
number 217 of the public acts of 1972, 25-54hh of
said supplement, as amended by section 1 of number
237 of the public acts of 1972, 25-54ii, 25-5411,
25-5400, 25-54pp, or sections 25-110 to 25-114,
inclusive of the 1971 noncumulative supplement to
the general statutes or any regulation, order or
permit adopted or issued thereunder by the
commissioner of environmental protection shall be
liable to the state for the reasonable costs and
expenses of the state in detecting, investigating,
controlling and abating such violation. Such
person shall also be liable to the state for the
reasonable costs and expenses of the state in
restoring the air, waters, lands and other natural
-------
274
Substitute Senate Bill Ho. 1973
resources of the state, including plant, wild
animal and aquatic life to their former condition
insofar as practicable and reasonable, or, if
restoration is not practicable or reasonable, for
any damage, temporary or permanent, caused by such
violation to the air, waters, lands or other
natural resources of the state, including plant,
wild animal and aguatic life and to the public
trust therein.. institution of a suit to recover
for such damage, costs and expenses shall preclude
the imposition of a civil penalty for such
violation as provided in section 3b of this act or
in the schedule or schedules adopted pursuant
thereto, but shall not preclude the application of
any other remedies.
(b) Whenever two or more persons knowingly or
negligently violate any provision of section 14-
lOOb or 14-100c of the 1971 noncumulative
supplement to the general statutes, subdivision
(3) of subsection (b) of section 15-121 of the
1971 noncumulative supplement to the general
statutes, as amended by number 91 of the public
acts of 1972, chapter 348 of the general statutes,
as amended, sections 19-507, 19-508, 19-513a, 19-
514 or 19-519, of the 1971 noncumulative
supplement to the general statutes, section 19-517
of the 1971 noncumulative supplement to the
general statutes, as amended by section 4 of
number 103 of the public acts of 1972, section 19-
519a of the 1969 supplement to the general
statutes, section 1 of number 103 of the public
acts of 1972, sections 19-524b, 19-524C, 19-524g,
19-524n, 22a-5, 22a-6 or 22a-7 of the 1971
noncumulative supplement to the general statutes,
section 5 of number 155 of the public acts of
1972, sections 25-2, 25-4a, 25-4d, 25-4e, 25-4f,
25-7a, 25-7b, 25-7d, 25-7e, 25-8a, 25-8c, 25-10,
25-11, 25-12, 25-15, 25-26, 25-26a, 25-27, 25-54c
to 25-541, inclusive, or 25-54aa, of the 1971
noncumulative supplement to the general statutes,
25-54cc of the 1971 noncumulative supplement to
the general statutes, as amended by section 1 of
number 252 of the public acts of 1972, 25-54dd of
the 1971 noncumulative supplement to the general
statutes, 25-54ee of the 1971 noncumulative
supplement to the general statutes, as amended by
number 217 of the public acts of 1972, 25-54hh of
said supplement, as amended by section 1 of number
237 of the public acts of 1972, 25-54ii, 25-5411,
25-54oo, 25-54pp, or sections 25-110 to 25-114,
inclusive of the 1971 noncumulative supplement to
-------
275
Substitute senate Bill Mo. 1973
the general statutes ot any regulation, order or
perait adopted or issued thereunder by the
commissioner and responsibility for the damage
caused thereby is not reasonably apportionable,
such persons shall, subject to a right of equal
contribution, be jointly and severally liable
under this section.
(c) Any person whose acts outside Connecticut
contribute to environmental damage in Connecticut
shall be subject to suit under this section if
such person is subject to in personei jurisdiction
vithin this state pursuant to section 52-59b of
the 1971 noncumulative supplement to the general
statutes, or if such person, in person or through
an agent, expects or should reasonably expect his
acts outside this state to have an effect upon the
environment in this state and process upon any
such person shall be served in the manner set
forth in section 52-59b of the 1971 noncumulative
supplement to the general statutes.
Sec. 2. (NEW) (a) The commissioner of
environmental protection is authorized to adopt a
schedule or schedules establishing the amounts, or
the ranges of amounts, of the civil penalties
which may become due under this section. Such
schedule or schedules shall be adopted by the
commissioner after public hearings pursuant to
section 22a-6 of the 1971 noncumulative supplement
to the general statutes and may be amended from
time to time in the same manner as for adoption.
The civil penalties established for each violation
shall be of such amount as to insure immediate and
continued compliance with applicable laws,
regulations, orders and permits. Such civil
penalties shall not exceed the following amounts:
(1) For failure to file any
registration, plan, report or record, or any
application for a permit, for failure to display
any registration, permit or order, or file any
other information reguired pursuant to any
provision of section 14-lOOb or 14-100c of the
1971 noncumulative supplement to the general
statutes, subdivision (3) of subsection (b) of
section 15-121 of the 1971 noncumulative
supplement to the general statutes, as amended by
number 91 of the public acts of 1972, chapter 348
of the general statutes, as amended, sections 19-
507, 19-508, 19-513a, 19-514, or 19-519, of the
1971 noncumulative supplement to the general
statutes, section 19-517 of the 1971 noncumulative
supplement to the general statutes, as amended by
-------
276
Substitute Senate Bill Ho. 1973
section 4 of number 103 of the public acts of
1972, section 19-519a of the 1969 supplement to
the general statutes, section 1 of number 103 of
the public acts of 1972, sections 19-524b. 19-
524c, 19-524g, 19-524n, 22a-5, 22a-6 or 22a-7 of
the 1971 noncumulative supplement to the general
statutes, section 5 of number 155 of the public
acts of 1972, sections 25-2, 25-4a, 25-4d, 25-4e,
25-4f, 25-7a, 25-7b, 25-7d, 25-7e, 25-8a, 25-8c,
25-10, 25-11, 25-12, 25-15, 25-26, 25-26a, 25-27,
25-54c to 25-541, inclusive, or 25-54aa, of the
1971 noncumulative supplement to the general
statutes, 25-54cc of the 1971 noncumulative
supplement to the general statutes, as amended by
section 1 of number 252 of the public acts of
1972, 25-54dd of the 1971 noncumulative supplement
to the general statutes, 25-54ee of the 1971
noncumulative supplement to the general statutes,
as amended by number 217 of the public acts of
1972, 25-54hh of said supplement, as amended by
section 1 of number 237 of the public acts of
1972, 25-54ii, 25-5411, 25-54oo, 25-54pp, or
sections 25-110 to 25-114, inclusive of the 1971
noncumulative supplement to the general statutes
or any regulation, order or permit adopted or
issued thereunder by the commissioner, and for
other violations of similar character as set forth
in such schedule or schedules, no more than one
thousand dollars for said violation and in
addition no more than one hundred dollars for each
day during which such violation continues after
receipt of a final order of the commissioner under
subsection (c) of this section assessing the civil
penalty for such violation;
(2) For deposit, placement, removal,
disposal, discharge or emission of any material or
substance in violation of any provision of section
14-100b or 14-IOOc of the 1971 noncumulative
supplement to the general statutes, subdivision
(3) of subsection (b) of section 15-121 of the
1971 noncumulative supplement to the general
statutes, as amended by number 91 of the public
acts of 1972, chapter 348 of the general statutes,
as amended, sections 19-507, 19-508, 19-513a, 19-
514, or 19-519, of the 1971 noncumulative
supplement to the general statutes, section 19-517
of the 1971 noncumulative supplement to the
general statutes, as amended by section 4 of
number 103 of the public acts of 1972, section 19-
519a of the 1969 supplement to the general
statutes, section 1 of number 103 of the public
-------
277
Substitute Senate Bill Mo. 1973
acts of 1972, sections 19-524b, 19-524c, 19-52Ug,
19-524n, 22a-5f 22a-6 or 22a-7 of the 1971
noncumulative supplement to the general statutes,
section 5 of nuaber 155 of the public acts of
1972, sections 25-2, 25-4a, 25-4d, 25-Ue. 25-4f,
25-7a, 25-7b, 25-7dr 25-7e, 25-8a, 25-8c, 25-10,
25-11, 25-12, 25-15, 25-26, 25-26a, 25-27, 25-54C
to 25-541, inclusive, or 25-54aa, of the 1971
noncuBulative supplement to the general statutes,
25-5Ucc of the 1971 noncuBulative supplement to
the general statutes, as aaended by section 1 of
nuBber 252 of the public acts of 1972, 25-54dd of
the 1971 noncuBulative supplement to the general
statutes, 25-54ee of the 1971 noncnaulative
suppleaent to the general statutes, as amended by
nuBber 217 of the public acts of 1972, 25-54hh of
said supplement, as amended by section 1 of nuBber
237 of the public acts of 1972, 25-54ii, 25-5411,
25-54oo, 25-54pp, or sections 25-110 to 25-114,
inclusive of the 1971 noncuBulative suppleaent to
the general statutes or any regulation adopted
thereunder by the coBBissioner, and for other
violations of similar character as set forth in
such schedule or schedules, no more than twenty-
five thousand dollars for said violation and in
addition no more than one thousand dollars for
each day during which such violation continues
after receipt of a final order of the commissioner
under subsection (c) assessing the civil penalty
for such violation;
(3) For violation of the terms of any
final order, except final orders under subsection
(e) of this section and eaergency orders and cease
and desist orders as set forth in subdivision (4)
of this subsection, of the commissioner, for
violation of the terms of any permit issued by the
commissioner, and for other violations of similar
character as set forth in such schedule or
schedules, no more than twenty-five thousand
dollars for said violation and in addition no more
than one thousand dollars for each day during
which such violation continues after receipt of a
final order of the commissioner under subsection
(c) of this section assessing the civil penalty
for such violation;
(4) For violation of any emergency order
or cease and desist order of the commissioner, and
for other violations of similar character as set
forth in such schedule or schedules, no more than
twenty-five thousand dollars for said violation
and in addition no more than five thousand dollars
-------
278
Substitute Senate Bill No. 1973
for each day during which such violation continues
after receipt of a final order of the commissioner
under subsection (c) assessing the civil penalty
for such violation.
(b) In adopting the schedule or schedules
prescribed by this section, the commissioner shall
consider the amounts, or ranges of amounts, of
assessment necessary to insure immediate and
continued compliance, and the character and degree
of injury or impairment to, or interference vith,
(1) public health, safety or welfare, (2) the
public trust in the air, water, land and other
natural resources of the state, and (3) reasonable
use of property which is caused or is likely to be
caused by the type of activity described in such
schedule or schedules.
(c) In addition, in setting a civil penalty
in a particular case, the commissioner shall
consider all factors which he deems relevant,
including, but not limited to, the following:
(1) The amount of assessment necessary
to insure immediate and continued compliance;
(2) The character and degree of impact
of the violation on the natural resources of the
state, especially any rare or unigue natural
phenomena;
(3) The conduct of the person incurring
the civil penalty in taking all feasible steps or
procedures necessary or appropriate to comply or
to correct the violation;
(4) Any prior violations by such person
of statutes, regulations, orders or permits
administered, adopted or issued by the
commissioner:
(5) The economic and financial
conditions of such person;
(6) The character and degree of injury
to, or interference with, public health, safety or
welfare which is caused or threatened to be caused
by such violation;
(7) The character and degree of injury
to, or interference with reasonable use of
property which is caused or threatened to be
caused by such violation.
(d) If the commissioner has reason to believe
that a violation has occurred for which a civil
penalty is authorized by this section, he may send
to the violator, by certified mail, return receipt
reguested, or personal service, a notice which
shall include:
-------
279
Substitute Senate Bill No. 1973
|1) A reference to the sections of the
statute, regulation, order or permit involved;
(2) A short and plain statement of the
matters asserted or charged;
(3) A statement of the amount of the
civil penalty or penalties to be imposed upon
finding after hearing that a violation has
occurred or upon a default: and
(4) a statement of the party's right to
a hearing
(e) The person to whom the notice is
addressed shall have twenty days from the date of
receipt of the notice in which to deliver to the
commissioner written application for a hearing.
If a hearing is requested then, after a hearing
and upon a finding that a violation has occurred,
the commissioner may issue a final order assessing
a civil penalty under this section which is not
greater than the penalty stated in the notice. If
such a hearing is not so requested, or if such a
reguest is later withdrawn, then the notice shall,
on the first day after the expiration of such
twenty day period or on the first day after the
withdrawal of such reguest for hearing, whichever
is later, become a final order of the commissioner
and the matters asserted or charged in the notice
shall be deemed admitted unless modified by
consent order, which shall be a final order. Any
civil penalty may be mitigated by the commissioner
upon such terms and conditions as he in his
discretion deems proper or necessary upon
consideration of the factors set forth in
subsection (b) hereof.
(f) All hearings under this section shall be
conducted pursuant to sections 4-177, to 4-184,
inclusive, of the 1971 noncumulative supplement to
the general statutes. The final order of the
commissioner assessing a civil penalty shall be
subject to appeal as set forth in section 4-183 of
the 1971 noncumulative supplement to the general
statutes except that any such appeal shall be
taken to the superior court for Hartford county
and shall have precedence in the order of trial as
provided in section 52-191 of the 1969 supplement
to the general statutes. Such final order' shall
not be subject to appeal under any other provision
of the general statutes. Mo challenge to any
final order of the commissioner assessing a civil
penalty shall be allowed as to any issue which
could have been raised by an appeal of an earlier
order, notice, permit, denial or other final
-------
280
Substitute Senate Bill Ho. 1973
decision by the commissioner. Any civil penalty
authorized by this section shall becoae due and
payable (i) at the time of receipt of a final
order in the case of a civil penalty assessed in
such order after a hearing, (ii) on the first day
after the expiration of the period in which a
hearing Bay be reguested if no hearing is
requested, or (iii) on the first day after any
withdrawal of a reguest for hearing.
(g) Any person acting within the teras and
conditions of a final order or permit issued to
him by the coMissioner shall not be subject to a
civil penalty, under this section, for such
actions.
(h) A civil penalty assessed in a final order
of the coBBissioner under this section iay be
enforced in the sa»e Banner as a judgaent of the
superior court, such final order shall be served
in person or by certified Bail, return receipt
reguested. Any notice of violation or final order
against a private corporation shall be served upon
at least one of the individuals enuaerated in
section 52-57 of the general statutes. After
entry, a transcript of such final order Bay be
filed by the commissioner, without requiring the
payment of costs as a condition precedent to such
filing, in the office of the clerk of the superior
court in any one or Bore of the following
counties: Any county in which the respondent
resides, any county in which the respondent has a
place of business, any county in which the
respondent owns real property and any county in
which any real property which is a subject of the
proceedings is located; or, if the respondent is
not a resident of the state of Connecticut, in
Hartford county. Upon such filing, such clerk or
clerks shall docket such order in the saae Banner
and with the same effect as a judgment entered in
the superior court within the county. Upon such
docketing, such order Bay be enforced as a
judgaent of such court.
(i) The provisions of this act are in
addition to and in no way derogate from any other
enforcement provisions contained in any statute
administered by the commissioner. The powers,
duties and remedies provided in such other
statutes, and the existence of or exercise of any
powers, duties or remedies hereunder or thereunder
shall not prevent the commissioner from exercising
any other powers, duties or remedies provided
herein, therein, at law or in eguity.
-------
281
Substitute Senate Bill No. 1973
Sec. 3. Section 22a-6 of the 1971
noncumulative supplement to the general statutes
is repealed and the following is substituted in
lieu thereof: The commissioner may [ (a) ] (1)
adopt, a»end or repeal SOCH environmental
standards, criteria and regulations^ AMD SOCH
PROCEDURAL BEGOLATIOSS AS ABE NECESSARY AND PROPER
TO CABBY GOT HIS FUNCTIONS, POiEBS AND DUTIES [to
carry out the purposes and provisions of this
title and sections 2-20a, 5-238a, subsection (c>
of section 7-131a, sections 7-131e, 7-131f,
subsection (a) of section 7-131g, sections 7-131i,
7-1311, 8-211, 8-212, subsection (a) of section
10-321, subsections (51) and (52) of section 12-
81, sections 12-217c, 12-217d, 12-247a, 12-252a.
12-252b, 12-258b, 12-258i, 12-265b, 12-265c, 12-
270b, 12-271a, subsections (u) and (v) of sections
12-412, subsections (a) and (b) of section 13a-94,
sections 13a-142a, 14-100b, 14-100c, chapter 268,
subsection (c) of section 18-99, subsections (b)
and (c) of section 19-24, section 19-25a,
subdivisions (2) and (3) of section 19-25b,
sections 19-25d, 19-25e, 19-25f, 19-25g, 19-25i,
Part la of chapter 348, section 19-408, chapter
360, sections 22-7a, 22-7b, 22-7d, 22-7e, 22-7f,
22-7g, 22-7i, 22-71, 22-7m, 22-91c, 22-91e,
chapters 447 and 448, sections 23-35, 23-37a, 23-
41, chapter 462, section 24-5, chapter 473,
sections 25-26, 25-28, 25-29, 25-34, chapter 474a,
sections 25-57, 25-62, 25-67, chapters 477, 478,
479, section 25-127, subsection (b) of section 25-
128, subsection (a) of section 25-131, chapters
490, 491, sections 26-257, 26-297, 26-303 and 47-
46a]. No adoption, amendment or repeal of any
standard, [criteria] CRITEBION or regulation shall
take effect except after a public hearing, thirty
days prior notice of the date, time, place and
subject matter of which shall be published in the
Connecticut Law journal, or earlier than thirty
days after the publication thereof in said law
journal: [ (b) ] X2JL enter into contracts with any
person, fir*, corporation or association to do all
things necessary or convenient to carry out the
functions, powers and duties of the department;
[ (c) ] JL21- [by himself or his designated agent,]
initiate and receive complaints as to any actual
or suspected [source of pollution or for purpose
of ascertaining compliance or noncompliance with
any provision of the general statutes or
regulation which may be promulgated pursuant to
this title or any of said chapters or sections]
-------
282
Substitute Senate Bill Ho. 1973
VIOLATION OF ANY STATUTE, REGULATION, PBBHIT OB
OBDEB ADMINISTERED, ADOPTED OB ISSUED BT HIH. The
commissioner (or his designated agent] shall have
the power to hold hearings, administer oaths, take
testimony and subpoena witnesses and evidence,
enter orders and institute legal proceedings
including, but not limited to, suits for
injunctions, for the enforcement of [his orders
and regulations in accordance with this title or
any of said chapters or sections] ANT STATUTE,
REGULATION, OBDEB OB PERMIT ADMINISTERED, ADOPTED
OR ISSUED BI HIH; [(d)] JJH IN ACCOBDANCE KITH
REGULATIONS ADOPTED BY HIH, REQUIRE, ISSDI, RENEH,
REVOKE, MODIFY OB DENY PERMITS, UNDER SUCH
CONDITIONS AS HE MAY PRESCRIBE, GOVERNING ALL
SOURCES OF POLLUTION IN CONNECTICUT ilTHIN HIS
JURISDICTION; JJzl. [ by himself or his designated
agent] IN ACCOBDANCE WITH CONSTITUTIONAL
LIMITATIONS, enter at all reasonable times upon
any public or private property, except a private
residence, for the purpose of inspection and
investigation to ascertain possible violations of
[this title or any of said chapters or sections or
of regulations made hereunder, ] ANY STATUTE,
REGULATION, ORDEB OB PERMIT ADMINISTERED, ADOPTED
OR ISSUED BY Hid [in accordance with
constitutional limitations,] and the owner,
managing agent or occupant of any such property
shall permit such entry, OB HE HAY APPLY TO ANY
COUBT HAVING CRIMINAL JURISDICTION FOB A IARRANT
TO INSPECT SUCH PBEHISES TO DETERMINE COHPLIANCE
WITH ANY STATUTE, REGULATION, OBDEB OR PEBHIT
ADMINISTERED, ADOPTED OB ENFOBCED BY HIM.* provided
any information relating to secret processes or
methods of manufacture or production ascertained
by the commissioner [or his agents] during, or as
a result of any inspection, investigation, hearing
cr otherwise shall be kept confidential and shall
not be disclosed; [(e) ] (6) undertake any studies,
inguiries, surveys or analyses he may deem
relevant, through the personnel of the department
or in cooperation with any public or private
agency, to accomplish the FUNCTIONS, POSERS AND
DUTIES OF THE COMMISSIONER [purposes of this title
or any of said chapters or sections]i (71 REQUIRE
THE POSTING OF SUFFICIENT PEBFOBHANCE BOND OB
OTHEB SECDBITY TO ASSUBE COMPLIANCE HITH ANY
PEBHIT OR OBDEB; HI PROVIDE BY NOTICE PBINTED ON
ANY FOBH THAT ANY FALSE STATEMENT HADE THEBEON OB
PURSUANT THERETO IS PUNISHABLE AS A CRIMINAL
OFFENSE UNDER SECTION 53a-157 OF THE 1969
-------
283
Substitute Senate Bill Mo. 1973
SUPPLEMENT TO THE GENERAL STATUTES. [In all cases
wherein the COBBissioner of environaental
protection is required to hold hearings, public or
otherwise, on any Batter within his jurisdiction,
he Bay hold such hearings or Bay designate a
•ember of his staff to act as a hearing exaainer,
such hearing exaainer to hold such hearing at a
tiae and place designated by the COBBissioner.
The COBBissioner or the hearing exaainer say issue
subpoenas, adainister oaths and cause the
attendance of witnesses and the production of
evidence and testiaony in any proceeding pending
before hia. The hearing exaainer shall, after
each hearing, file with the coaaissioner a report
including a finding of fact and recoaaendations.
After considering the report of the hearing
exaainer and the testiaony of the hearing, the
coaaissioner shall issue such order or perait as
is applicable to the particular proceeding. ]
Sec. 4. Section 22a-7 of the 1971
noncuBulative suppleaent to the general statutes
is repealed and the following is substituted in
lieu thereof: The coaaissioner, whenever he finds
after investigation that any person [, fita,
corporation or association] is causing, engaging
in or aaintainingj. OR IS ABOUT TO CAUSE, EHGAGE IN
OR MAINTAIN^ any condition or activity which, in
his judgaent, will result in or is likely to
result in [irreversible or irreparable] IMMINENT
AMD SUBSTANTIAL daaage to the environaent and it
appears prejudicial to the interests of the people
of the state to delay action until an opportunity
for a hearing can be provided. Bay, without prior
hearing, issue a cease and desist order in writing
to such person [, fira, corporation or
association] to discontinue, abate or alleviate
such condition or activity. Upon receipt of such
order such person [, fira, corporation or
association] shall iaaediately discontinue, abate
or alleviate OR SHALL REFRAIN FROM CAUSING,
ENGAGING IM OR MAINTAINING such condition or
activity. The coaaissioner shall, within ten days
of such order, hold a hearing to provide the
person [, fira, corporation or association] an
opportunity to be heard and show that such
condition does not exist. Such order shall reaain
in effect until ten days after the hearing within
which tiae a new decision based on the hearing
shall be Bade.
Sec. 5. Section 22a-2 of the 1971
noncuaulative supplement to the general statutes
-------
284
Substitute Senate Bill Ho. 1973
is repealed and the following is substituted in
lieu thereof: la.} There shall be a department of
environmental protection which shall have
jurisdiction over all Batters relating to the
preservation and protection of the air, water and
other natural resources of the state.. Said
department shall be under the direction of a
commissioner of environmental protection who shall
be appointed in accordance with the provisions of
sections 4-5 to ft-8, inclusive.
JbJL AS USED IN THIS ACT AND CHAPTERS 263,
268, 348, 360, 361a, 439, 447, 448, 449, 452, 462,
473, 474, 474a, 476, 477, 478, 479 AND 490, OF THE
GENERAL STATUTES, AS AMENDED, EZCEPT WHERE
OTHERWISE PROVIDED, "COMMISSIONER" BEANS THE
COMMISSIONER OF ENVIRONMENTAL PROTECTION OR HIS
DESIGNATED AGENT. THE COMMISSIONER OF
ENVIRONMENTAL PROTECTION SHALL HAVE THE AUTHORITY
TO DESIGNATE AS HIS AGENT (1) ANY DEPUTY
COMMISSIONER TO EXERCISE ALL OR PART OF THE
AUTHORITY, POWERS AND DUTIES OF SAID COMMISSIONER
IN HIS ABSENCE, (2) ANY EMPLOYEE, ASSISTANT OR
AGENT EMPLOYED PURSUANT TO SECTION 22a-4 OF THE
1971 NONCUHULATIVE SUPPLEMENT TO THE GENERAL
STATUTES TO EXERCISE SUCH AUTHORITY OF THE
COMMISSIONER OF ENVIRONMENTAL PROTECTION AS HE
DELEGATES FOR THE ADMINISTRATION OR ENFORCEMENT OF
ANY APPLICABLE STATUTE, REGULATION, PERMIT OR
ORDER, EXCEPT THE AUTHORITY TO RENDER A FINAL
DECISION, AFTER A HEARING, ASSESSING A CIVIL
PENALTY UNDER SECTION 2 OF THIS ACT, AND (3) THE
COMMISSIONER OF STATE POLICE AND ANY LOCAL AIR
POLLUTION CONTROL OFFICIAL OR AGENCY TO EXERCISE
SUCH AUTHORITY AS THE COMMISSIONER OF
ENVIRONMENTAL PROTECTION DELEGATES FOR THE
ENFORCEMENT OF ANY APPLICABLE STATUTE, REGULATION,
ORDER OR PERMIT PERTAINING TO AIR POLLUTION,
EXCEPT THE AUTHORITY TO RENDER A FINAL DECISION,
AFTER A HEARING, ASSESSING A CIVIL PENALTY UNDER
SECTION 2 OF THIS ACT.
Jet AS USED IN THIS ACT AND CHAPTERS 263,
268, 348, 360, 361a, 439, 447, 448, 449, 452, 462,
473, 474, 474a, 476, 477, 478, 479 AND 490, OF THE
GENERAL STATUTES, AS AMENDED, EXCEPT WHERE
OTHERWISE PROVIDED, "PERSON" MEANS ANY INDIVIDUAL,
FIRM, PARTNERSHIP, ASSOCIATION, SYNDICATE,
COMPANY, TRUST, CORPORATION, MUNICIPALITY, AGENCY
OR POLITICAL OB ADMINISTRATIVE SUBDIVISION OF THE
STATE, OR OTHER LEGAL ENTITY OF ANY KIND.
Sec. 6. Subsection (a) of section 19-518 of
the 1971 noncuiulative supplement to the general
-------
285
Substitute Senate Bill Ho. 1973
statutes is repealed and the following is
substituted in lieu thereof: Any person whose
interest is substantially affected by the entry of
any order or decision of the commissioner OTHER
THAN AN ORDEB UNDER SECTIOH 2 OF THIS ACT lay,
within fifteen days of the entry of such order or
decision, appeal therefrom to the court of common
pleas for the county wherein the major portion of
the affected property lies, notice of which appeal
shall be filed with the commissioner.
Sec. 7. Section 25-17 of said supplement is
repealed and the following is substituted in lieu
thereof: Any person, fin or corporation, whether
public or private, aggrieved by any order,
authorization or decision of the commissioner
OTHER THAN AN ORDER UNDER SECTION 2 OF THIS ACT
•ay appeal therefrom to the superior court for
Hartford county within fifteen days after the
issuance of such order, authorization or decision.
Such appeal shall have precedence in the order of
trial in accordance with the provisions of section
52-192.
Sec. 8. Section 25-54g of said supplement is
repealed and the following is substituted in lieu
thereof: If the commissioner finds that any
municipality is causing pollution of the waters of
the state, or that a community pollution problem
exists, or that pollution by a municipality or a
community pollution problem can reasonably be
anticipated in the future, he [shall] HAT issue to
the municipality an order to abate pollution, if
the commissioner, after giving due regard to
regional factors, determines that such pollution
can best be abated by the action of two or more
adjacent municipalities, he may issue his order
jointly or severally to such municipalities. If a
community pollution problem exists in, or if
pollution is caused by, a municipality
geographically located all or partly within the
territorial limits of another municipality, the
commissioner (shall] HAT, after giving due regard
to regional factors, determine which municipality
shall be ordered to abate the pollution or [shall]
HAT, after giving due regard to regional factors,
issue an order to both of such municipalities
jointly to provide the facilities necessary to
abate the pollution.. Any order issued pursuant to
this section shall include a time schedule for
action by the municipality or municipalities, as
the case may be, which may require, but is not
limited to, the following steps to be taken by
-------
286
Substitute Senate Bill Ho. 1973
such Municipality or Municipalities: (a)
Submission of an engineering report outlining the
problem and recommend solution therefor for
approval by the commissioner; (b) submission of
contract plans and specifications for approval by
the commissioner; (c) arrangement of financing:
(d) acceptance of state and federal construction
grants; (e) advertisement for construction bids;
(f) start of construction; (g) placing in
operation.
Sec. 9. Section 25-5Uh of said supplement is
repealed and the following is substituted in lieu
thereof: If the commissioner finds that any
person prior to Hay 1, 1967, has caused pollution
of any of the waters of the state, which pollution
recurs or continues after said date, he [shall]
MAY issue an order to abate pollution to such
person. The order shall include a time schedule
for the accomplishment of the necessary steps
leading to the abatement of the pollution. This
section shall not apply to any person who is
sub-feet to the provisions of section 25-54i.
Sec. .10. Subsection fd) of section 25-54i of
said supplement is repealed and the following is
substituted in lieu thereof: If the commissioner
finds that any person has, after May 1, 1967,
initiated, created or originated any discharge
into the waters of the state without a permit as
reguired in subsection (a) hereof, or in violation
of such permit, he [shall] Mil, notwithstanding
any request for a hearing pursuant to section 25-
54o or the pendancy of an appeal therefrom,
reguest the attorney general to bring an action in
the superior court for Hartford county to enjoin
such discharge by such person until he has
received a permit from the commissioner or has
complied with a permit which the commissioner has
issued pursuant to this section. Any such action
brought by the attorney general shall have
precedence in the order of trial as provided in
section 52-191.
Sec. 11. Section 25-54j of said supplement
is repealed and the following is substituted in
lieu thereof: The commissioner shall periodically
investigate and review those sources of discharge
which are operating pursuant to any order, permit,
directive or decision issued by the water
resources commission or the commissioner before or
after May 1, 1967, and, if he determines that
there has been any substantial change in the
manner, nature of volume of such discharge which
-------
287
Substitute Senate Bill Ho. 1973
will cause or threaten pollution to any of the
waters of the state, or if he finds that the
system treating such discharge, or the operation
thereof, no longer insures or adequately protects
against pollution of the waters of the state, the
commissioner [shall] MAY issue an order to abate
such pollution to such person or Municipality.
Such order shall include a time schedule for the
accomplishment of the necessary steps leading to
the abatement of the pollution.
Sec. 12. Section 25-54k of said supplement
is repealed and the following is substituted in
lieu thereof: If the commissioner finds that any
person is maintaining any facility or condition
which reasonably can be expected to create a
source of pollution to the waters of the state, he
[shall] HAT issue an order to such person
maintaining such facility or condition to take the
necessary steps to correct such potential source
of pollution. Any person who receives an order
pursuant to this section shall have the right to a
hearing and an appeal in the same manner as is
provided in section 25-54o and 25-54p. if the
commissioner finds that the recipient of any such
order fails to comply therewith, he [shall] HAT
request the attorney general to bring an action in
the superior court for Hartford county to enjoin
such person from maintaining such potential source
of pollution to the waters of the state. All
actions brought by the attorney general pursuant
to the provisions of this section shall have
precedence in the order of trial as provided in
section 52-191.
Sec. 13. Section 25-541 of said supplement
is repealed and the following is substituted in
lieu thereof: Whenever the commissioner issues an
order to abate pollution to any person pursuant to
the provisions of section 25-5Uh or 25-54j, and
the commissioner finds that such person is not the
owner of the land from which such source of
pollution emantes, he may issue a like order to
the owner of such land or shall send a certified
copy of such order, by certified mail, return
receipt requested, to the owner at his last-known
post-office address. When the commissioner 'issues
SOCH an order to an owner, the owner and the
person causing such pollution shall be jointly and
severally responsible. Any owner to whom SOCH an
order is issued or who received a certified copy
of an order pursuant to this section shall be
entitled to all notices of, and rights to
-------
288
Substitute Senate Bill Ho. 1973
participate in, any proceedings before or orders
of the commissioner and to such hearing and rights
of appeal as are provided for in sections 25-5<*o
and 25-54p.
Sec. 14. Section 25-5Up of said supplement
is repealed and the following is substituted in
lieu thereof: Any person or municipality
aggrieved, by any order of the commissioner OTHER
THAN AN ORDER UNDER SECTION 2 OF THIS ACT to abate
pollution may, after a hearing by the commissioner
as provided for in section 25-5U1 or section 25-
5
-------
289
substitute Senate Bill Ho. 1973
such steps as are necessary to cause the discharge
of such Municipality to comply Kith any
outstanding order to abate pollution, and the
powers of such municipality shall be pro tanto
suspended until completion and such municipality
shall be obligated to pay to the state for the
•unicipality's share of the cost of such steps
plus one-tenth of one per cent of such share. The
commissioner of environmental protection shall
determine a schedule of payments for said
obligation, which payments shall be made in not
•ore than twenty egual annual instalments. If
such municipality fails to pay any such
instalment, the commissioner shall notify the
comptroller vho shall thereafter withhold his
order for the payment of any for* of state aid or
grant to such municipality except those provided
under titles 10 and 17 until the total of such
withheld payments eguals the total of any such
unpaid instalments.
(c) If any municipality violates the terms of
any injunction obtained in accordance with the
provisions of this section, the commissioner
[shall] MAY notify the public works commissioner,
with a copy of such notice to such municipality,
to take such steps as are necessary to cause the
discharge of such municipality to comply with the
terms of such injunction, and the powers of such
municipality shall be pro tanto suspended until
completion, provided, however, that such
municipality shall be obligated to pay to the
state for the municipality's share of the cost of
such steps plus one-tenth of one per cent of such
share. The commissioner of environmental
protection shall determine a schedule of payments
for said obligation, which payments shall be made
in not more than twenty egual annual instalments.
If such municipality fails to pay any such
instalment, the commissioner shall notify the
comptroller who shall thereafter withhold his
order for the payment of any form of state aid or
grant to such municipality except those provided
under titles 10 and 17 until the total of such
withheld payments eguals the total of such unpaid
instalments.
Sec. 16.. Section 25-5Uqq of said supplement
is repealed and the following is substituted in
lieu thereof: Any person who violates any
provision of sections 25-5Unn to 25-54pp,
inclusive, HAY Cshall] be fined not less than one
hundred dollars nor more than three hundred
-------
290
Substitute Senate Bill Mo. 1973
dollars for the first offense, and not less than
three hundred dollars nor Bore than five hundred
dollars for the second and each subsequent
offense. A separate and distinct offense shall be
construed to be committed each day on vhich such
person shall continue or permit any such
violation.
Sec. 17. This act shall take effect from its
passage.
Certified as correct by
Legislative Commissioner.
Clerk of the Senate.
Clerk of the House.
Approved _ —_ . .___ . } 1973.
Governor.
-------
291
APPENDIX B
WAUKEGAN V. POLLUTION CONTROL BOARD
-------
292
57 III.2d 170
Tha CITY OF WAUKEGAN at •!.,
Appellees,
v.
Tha POLLUTION CONTROL BOARD at «l.
Appaal of ENVIRONMENTAL PROTEC-
TION AGENCY at at.
No. 45984.
Supreme Court of Illinois.
March 29, 1974.
Rehearing Denied May 31, 1974.
Proceeding on appeal from action and
order of the Pollution Control Board as-
sessing fines against cities and corporation.
The Appellate Court of the Second Dis-
trict, 11 Ill.App.3d 189, 296 N.E.2d 102, re-
versed and the Board appealed. The Su-
preme Court, Ward, J., held that the provi-
sion of Environmental Protection Act au-
thorizing Board to impose civil penalties
for violation of Act does not violate sepa-
ration of powers provisions.
Judgment of appellate court reversed.
I. Constitutional Law €=13
Provision of l')~0 Constitution relating
to separation of powers is essentially the
same as that of 1870 Constitution and
there is no intent to change existing law.
S.H.A.Const.l°70, art. 2, § 1.
2. Constitutional Law C=>50
Constitutional declaration of separa-
tion of powers docs not mean that the leg-
islative, executive and judicial power
should be kept so entirely separate and dis-
tinct as to have no connection or depend-
ence, but only that the whole power of two
or more of these departments should not be
lodged in the same hands whether of one
or many. S.H.A.Const.1970, art. 2, § 1.
3. Constitutional Law C=>50
Separation of power does not forbid
every exercise of function by one branch
of government which conventionally is ex-
ercised by another. S.H.A.Const.1970, art.
2, § 1.
4. Constitutional Law C= 62(10)
Health and Environment 28
On review of findings and orders of
Pollution Control Board, court might con-
sider all questions of law and fact in the
entire record. S.H.A. ch. 110, § 275 et seq.;
ch. 111V4, §§ 1033(c), 1041; S.H.A.Const.
1970, art. 1 !,§§!, 2.
6. Administrative Law and Procedure <5=>305
Legislature may confer those powers
on administrative agency that are resona-
-------
293
OITT OF WAUKEOAN v. POLLUTION CONTROL BOARD
Cite •« 311 N.K.2d 140
bly necessary to accomplish legislative pur- tary penalties under the
pose of agency.
m. 147
William J. Scott, Atty. Gen., Spring-
field (Thomas J. Irnniel, Asst. Atty. Gen.,
and Mcridcth Wright, Senior Law Student,
of counsel), for appellants.
Conzelman, Schultz & Snarski and Hall,
Meyer, Fisher, Holmberg, Snook & May,
VVaukegan (Murray R. Conzelman, Wau-
kegan, of counsel), for appellees.
WARD, Justice.
In October, 1971, the Illinois Environ-
mental Protection Agency filed a complain^
with the Pollution Control Board (hereaf-
ter, the Board) against the City of Wauke-
gan, Zion State Bank and Trust Company,
T-K City Disposal, Inc., and Tewes Co.,
Inc., charging various violations of the En-
vironmental Protection \ct, including a
charge of having operated a refuse dispos-
al site without obtaining a permit from the
Environmental Protection Agency (111.
Rev.Stat. 1971, ch. HH/$, par. 1021(e)).
After a hearing, the Board imposed a fine
of $1000 against the City of Waukegan, and
fines of $250 against the T-K Disposal,
Inc., and Tewes Co., Inc., The charges
against the Zion State Bank and Trust
Company were dismissed by the Board.
The Board's order was appealed by the
City of Waukegan, T-K Disposal, Inc., and
Tewes Co., Inc., to the Appellate Court for
the Second District under provisions of the
Environmental Protection Act and the Ad-
ministrative Review Act (IlI.Rev.Stat.
1971, ch. 111^, par. 1041; ch. 110, par. 264
et scq.). That court, holding that the
grant of authority to the Board to impose
a discretionary fine was an unlawful dele-
gation of judicial power, reversed and set
aside the Board's order. (11 Ill.App.3d 189,
296 N.E.2d 102.) We granted leave to ap-
peal.
But one question is before us: Was the
authority given the Board to impose mone-
Environmental
Protection Act (Ill.Rev.Stat.1971, ch. llli/£,
pars. 1033(b), 1042) a delegation of ju-
dicial power in violation of the scpara-
tion-of-powers provision of the Constitu-
tion of Illinois or in violation of the Con-
stitution of the United States?
The challenged section of the Act con-
fers authority on the board to impose a
penalty of not to exceed $10,000 for a vio-
lation of the Act, or of a Board regulation
or order, and to impose an additional pen-
alty not to exceed $1,000 for each day of
continuing violation.
Whether the grant of authority was val-
id has been considered in three other ap-
pellate districts. The court for the Fifth
District held that the constitutional separa-
tion of powers had been violated (South-
ern Illinois Asphalt Co. v. Environmental
Protection Agency, 15 Ill.App.3d 66. 303
N.E.2d 606), and in the First and Third
Districts the delegation of power was held
to be valid (Ford v. Environmental Protec-
tion Agency, 9 Ill.App.3d 711, 292 N.E.2d
540; Incinerator, Inc. v. Illinois Pollution
Control Board, 15 Ill.App.3d 514, 305 N.E.
2d 35).
[1] It is not disputed that there is be-
fore us only the question of the imposition
of civil penalties. There is no contention
that the penalties concerned here were de-
signed to be or are considered criminal
sanctions. See 1 K. Davis, Administrative
Law Treatise sec. 2.13 (1958).
Section 1 of article II of the Constitu-
tion of Illinois of 1970, S.H.A. provides:
"The legislative, executive and judicial
branches are separate. No branch shall
exercise powers properly belonging to
another."
The provision is essentially the same as
that of our 1870 Constitution. The only
change is in simplified language. There
was no intent to change the existing law.
The report of the Committee on Local
Government on the Proposed Separation of
-------
294
148
311 NORTH EASTERN REPORTER, 2d SERIES
Powers Article of the 1970 Constitutional
Convention states in part:
"The Committee did not intend to effect
a change in the common law which has
developed from the present language
[i. e., of 1870 Constitution]." (6 Record
of Proceedings, Sixth Illinois Constitu-
tional Convention 566.)
The following comment also indicates that,
consistent with decisions under the 1870
Constitution, no inflexible separation of
powers was being considered:
"The point was made during Commit-
tee deliberations that Ihc present lan-
guage may lie construed as being incon-
sistent with a constitutionally created
commission, agency or office (such as
Ombudsman) having powers similar to
one or more of the three principal gov-
ernmental departments. The Committee
is of the view that neither the present
language nor the proposed language is in-
consistent with such a hybrid commission,
agency or office." 6 Proceedings 566-
567.
[2] One of the earliest (1839) and one
of the enduring commentaries in Illinois on
the separation of powers appears in Field
v. People ex rel. McClernand, 3 111. (2
Scam.) 79, 83-84. It was said:
"The first and second sections of the
first article of the [1818] Constitution
divide the powers of Government into
three departments, the legislative, execu-
tive, and judicial, and declare that nei-
ther of these departments shall exercise
any of the powers properly belonging to
either of the others, except as expressly
permitted. This is a declaration of a
fundamental principle; and, although one
of vital importance, it is to be understood
in a limited and qualified sense. It does
not mean that the legislative, executive,
and judicial power should be kept so en-
tirely separate and distinct as to have no
connection or dependence, the one upon
the other; but its true meaning, both in
theory and practice, is, that the whole
power of two or more of these depart-
ments shall not be lodged in the same
hands, whether of one or many. That
this is the sense in which this maxim was
understood by the authors of our govern-
ment, and those of the general and State
governments is evidenced by the constitu-
tion of all. In every one, there is a the-
oretical or practical recognition of this
maxim, and at the same time a blending
and admixture of different powers.
This admixture in practice, so far as to
give each department a constitutional
control over the other, is considered, by
the wisest statesmen, as essential in a
free government, as a separation."
l:\f\A has had a continuing vitality. In
1966 we cited Vichl in Hill v. Rolyca, 3J
Ill.2d 552, 557, 216 N.K.2d 705, 70S, saying:
"[T]he true meaning, in theory and in
practice, of the doctrine of separation of
powers is 'that the whole power shall not
be lodged in the same hands, whether of
one or many.' (Field v. People ex rel.
McClearnand, 2 Scam. 79,83.) The separa-
tion of powers doctrine was not designed
to achieve a complete divorce between the
three departments of a single operating
government. (People v. Reiner, 6 I11.2d
337, 129 N.E.2d 159.)"
[3] It has been generally recognized
that separation of powers does not forbid
every exercise of functions by one branch
of government which conventionally is ex- -
ercised by another branch. Professor
Frank Cooper (1 F. Cooper, State Admin-
istrative Law 16 (1965)) observes: "[T]he
real thrust of the separation of powers phi-
losophy is that each department of govern-
ment must be kept free from the control or
coercive influence of the other depart-
ments." He also indicates that it may be
irrelevant if an agency has legislative or
judicial characteristics so long as the
legislature or the judiciary can effectively
correct errors of the agency. The notion
was stated more fully in 1 K. Davis, Admin-
istrative Law Treatise 68-69 (1958):
"In the organic arrangements that we
have been making in recent decades in
the establishment and control of adminis-
-------
295
CITY OF WAUKEOAN T. POLLUTION CONTROL BOARD 111. 149
Cltp ns 311 N.K.Zil 140
trativc agencies, the principle that has
guided us is the principle of check, not
the principle of separation of powers.
We have had little or no concern for
avoiding a mixture of three or more kinds
of powers in the same agency; we have
had much concern for avoiding or mini-
mizing unchecked power. The very
identifying badge of the modern admin-
istrative agency has become the combina-
tion . of judicial power (adjudication)
with legislative power (rule making).
But we have taken pains to see that the
agencies report to and draw their funds
from our legislative bodies, that the per-
sonnel of the agencies are appointed and
reappointcd by the executive, and that
the residual power of check remains in
the judiciary." Sec also Davis, A New
Approach to Delegation, 36 U.Chi.L.Rev.
713 (196°).
The Supreme Court of the United States
has never considered that the powers in
government arc held in rigidly separated
compartments. Professor Davis (1 K.
Davis, Administrative Law Treatise sec.
2.12, at 131) has observed: "The Supreme
Court of the United States has never held
that judicial power has been improperly
vested in an agency, although the question
has come up in [many] cases * * *."
Nor has the court expressed alarm or un-
due concern about conferring a power to
impose monetary penalties on an adminis-
trative body. As early as 1909 the court
upheld the grant of power to the Secretary
of Commerce and Labor to impose mone-
tary penalties for violations of an immi-
gration statute. In Oceanic Steam Navi-
gation Co. v. Stranahan, 214 U.S. 320, 339,
29 S.Ct. 671, 676, 53 L.Ed. 1013, 1022, it
was said:
"In accord with this settled judicial
construction the legislation of Congress
from the beginning, not only as to tariff,
but as to internal revenue, taxation, and
other subjects, has proceeded on the con-
ception that it was within the competen-
cy of Congress, when legislating as to
matters exclusively within iti control, to
impose appropriate obligations, and sanc-
tion their enforcement by reasonable
money penalties, giving to executive of-
ficers the power to enforce such penal-
ties without the necessity of invoking the
judicial power."
Sec also Lloyd Sabaudo Socicta v. Kiting,
287 U.S. 329, 53 S.Ct. 167, 77 L.Kd. 341;
Elting v. North German Lloyd, 287 U.S.
324, 53 S.Ct. 164, 77 L.Ed. 337; Sunshine
Anthracite Coal Co. v. Adkins, 310 U.S.
381, 60 S.Ct. 907, 84 L.Ed. 1263; Hclver-
ing v. Mitchell, 303 U.S. 391, 58 S.Ct. 630,
82 L.Ed. 917; N. A. Woodworth Co. v.
Kavanagh, 102 F.Supp. °, 11, aff'd (6th
Cir.), 202 F.2d 154.
Partly as a consequence of the court's
decisions, many Federal agencies have been
empowered by the Congress to impose
monetary penalties directly, that is, on the
agency's own action and authority. See,
e. g., Occupational Safety and Health Act
of 1970, 29 U.S.C. sec. 666 (19/0); the
Postal Service, 39 U.S.C. sees. 5206, 5603
(1970), 49 U.S.C. sec. 1471 (1970), C.F.R.
sees. 927.1, 927.2 (1971), Allman v. United
States, 131 U.S. 31, 9 S.Ct. 632, 33 L.Ed.
51; the Immigration Act, 8 U.S.C. sec.
1229 (1970); the Federal Home Loan
Bank Act, 12 U.S.C. sec. 1425b(b) (1970);
Atomic Energy Commission, 42 U.S.C. sec.
2282 (1970); Federal Railroad Safety and
Hazardous Materials Transportation Con-
trol Act of 1970, 45 U.S.C. sec. 435
(1970); Endangered Species Conservation
Act of 1969, 16 U.S.C. sec. 668 (1970);
Water Pollution Control Act, 33 U.S.C.
sees. 1321(b), 1415 (1970); Ports and Wa-
terways Safety Act of 1972, 33 U.S.C. sec.
1226; Marine Protection, Research and
Sanctuaries Act of 1972, 16 U.S.C. sec.
1433; Federal Environmental Pesticide
Control Act of 1972, 7 U.S.C. sec. 136/;
Marine Mammal Protection Act of 1972,
16 U.S.C. sec. 1375; see also Goldschmid, 2
Recommendations and Reports of the Ad-
ministrative Conference of the United
States, July 1, 1970-Deccmher 31, 1972, app.
I (hereafter cited as Administrative Con-
ference).
-------
296
150 Hi.
311 NORTH EASTERN REPORTER, 2d SERIES
The Administrative Conference of the
United States (5 U.S.C. sec. 571 ct scq.) in
a recommendation to the Congress made on
December 14, 1972 (Recommendation 72-6,
entitled "Civil Money Penalties as a Sanc-
tion") observed: "Federal administrative
agencies enforce many statutory provisions
and administrative regulations for violation
of which fixed or variable civil money
penalties may be imposed. * * * In-
creased use of civil money penalties is an
important and salutary trend. * * * In
many areas of increased concern (e. g.,
health and safety, the environment, con-
sumer protection) availibility of civil mon-
ey penalties might significantly enhance an
agency's ability to achieve its statutory
goals." 2 Administrative Conference 67-
68.
In a report in support of Recommenda-
tion 72-6 Professor Harvey Goldschmid
stated: "Although a few questionable state
cases exist, the leading commentators (1 K.
Davis, sees. 2.12-2.13; L. Jaffe [Judicial
Control of Administrative Action (1965)]
109-15; W. Gellhorn, [Administrative Pre-
scription and Imposition of Penalties, 1970
Wash.U.L.Q. 265,] 285) and a number of
Supreme Court decisions (see, e. g., Helver-
ing v. Mitchell, 303 U.S. 391, 58 S.Ct. 630,
82 L.Ed. 917 (1938); Lloyd Sabaudo So-
cieta v. Elting, 287 U.S. 329, 53 S.Ct. 167,
77 L.Ed. 341 (1932); Elting v. North Ger-
man Lloyd, 287 U.S. 324, 53 S.Ct. 164, 77
L.Ed. 337 (1932); Oceanic Steam Naviga-
tion Co. v. Stranahan, 214 U.S. 320, 29 S.
Ct. 671, 53 L.Ed. 1013 (1909)) indicate
that an administrative imposition system
can surmount constitutional barriers. This
report concludes that there are no signifi-
cant constitutional impediments to such a
system, even though agencies will, at times,
be delegated functions traditionally exer-
cised by Congress or the courts." 2 Ad-
ministrative Conference, An Evaluation of
the Present and Potential Use of Civil
Money Penalties as a Sanction by Federal
Administrative Agencies 896, 901-902.
State courts as well have approved
grants of power to administrative agencies
to impose monetary penalties.
New York's insurance law providing for
monetary penalties for violations after no-
tice and hearing by the superintendent of
insurance has been upheld. (Old Republic
Life Insurance Co. v. Thacher (1%2), 12
N.Y.2d 4R, 234 N.Y.S.2d 702, 186 N.K.2d
554.) In Jackson v. Concord Co. (1'XW), 54
N.J. 113, 253 A.2d 7(>3, the Supreme Court
of New Jersey observed that there could
not be any valid constitutional objection to
the grant of authority to award money
damages "at this advanced date in the de-
velopment of administrative law" (54 N.J.
at 126, 253 A.2d at 800) and in view of a
provision in the statute for judicial review.
The Supreme Court of Utah held that a
statute authorizing the Public Service
Commission to impose discretionary mone-
tary penalties was not unconstitutional.
Citing Helvering v. Mitchell, 303 U.S. 391,
58 S.Ct. 630, 82 L.Ed. 917 the court said it
was "well established" that an agency
might be given such authority without vio-
lating the separation of powers. Wycoff
Co. v. Public Service Commission (1962),
13 Utah 2d 123, 126, 369 P.2d 283, 285;
see also Rody v. Hollis (1972), 81 Wash.2d
88, 500 P.2d 97; General Drivers & Help-
ers Union Local 662 v. Wisconsin Employ-
ment Relations Board (1963), 21 Wis.2d
242, 124 N.W.2d 123.
We would observe, too, that by statute in
Pennsylvania the Environmental Hearing
Board may impose monetary penalties for
violations of the State's Clean Streams
Law. (Pa.Stat. tit. 35, sec. 691.605 (1970).)
In United States Steel Corp. v. Department
of Environmental Resources (1973), 7 Pa.
Cmwlth. 429, 300 A.2d 508, the court con-
sidered the fairness of a penalty that had
been imposed, but no challenge was made
to the delegation of authority to the Board.
It is clear that the trend in State deci-
sions is to allow administrative agencies to
impose discretionary civil penalties. See
W. Gellhorn, Administrative Prescription
and Imposition of Penalties, 1970 Wash.U.
L.Q. 265; McKay, Sanctions in Motion:
The Administrative Process, 49 Iowa L.
Rev. 441 (1964); K. Davis, 1 Administra-
tive Law Treatise sec. 2.12.
-------
297
OITT OF WAUKEOAN v. POLLUTION CONTROL BOARD
Ctto ltd 311 N.K.M Hrt
111.
This court has upheld the delegation to
administrative agencies of the power to im-
pose what practically, though not formally,
may be considered penalties. (See, e. g.,
Cermak Club, Inc. v. Illinois Liquor Control
Comm., 30 I11.2d 90, 195 N.E.Zd 178 (re-
voking a license); Vissering Mercantile
Co. v. Annunzio, 1 I11.2d 108, 115 N.E.Zd
306 (publishing names of minimum-wage-
law violators); Gadlin v. Auditor of Pub-
lic Accounts, 414 111. 89, 110 N.E.2d 234
(denying a license); People ex rel. Rice v.
Wilson Oil Co., 364 111. 406, 4 N.E.2d 847
(entering penalty on bond to secure tax
payments); see also Molting v. Civil Serv-
ice Comm. of Chicago, 7 Ill.App.2d 147,
129 N.E.2d 236 (discharging or otherwise
disciplining police officer).) It has been
observed that, realistically viewed, there is
no significant difference between the pow-
er given to impose what really operate as
penalties, such as in the above instances,
and the power to impose a monetary penal-
ty. Davis, sec. 2.13; Jaffc, Judicial Con-
trol of Administrative Action 112.
This court has also considered cases in
which there were delegations of what
clearly were set out as powers to impose
penalties. In Cleveland, Cincinnati, Chica-
go and St. Louis Hy. Co. v. People ex rcl.
Barter, 212 III. 638, 72 N.I-:. 725, for exam-
ple, this court held that the authority of
the tax assessor and county clerk to assess
a penalty against land owners who fail to
clean streams on their lands, as required by
the Drainage Act, constituted an unconsti-
tutional delegation of judicial power. How-
ever, under the statute there were no
standards for the guidance and control of
the administrative officers, no provisions
for hearing and none for judicial review.
In Reid v. Smith, 375 111. 147, 30 N.E.
2d 908, the Prevailing Wage Act was con-
sidered. That act provided a penalty of
$10 a day against any contractor for public
work for each employee who was not paid
the prevailing wage. The Act authorized
the Department of Labor or the other pub-
lic contracting body to withhold these pen-
alties from the contract price to be paid
the employer. This court held, citing
Cleveland Cincinnati, Chicago and St.
Louis Ry. Co. v. People ex rel. Barter, that
the statute conferred judicial authority
contrary to the constitutional separation of
powers. However the statute in Reid
bears little resemblance to the legislation
before us. In Reid the Prevailing Wage
Act was declared unconstitutional, because,
inter alia, while the statute provided that
in all contracts for public works the con-
tractors had to pay the prevailing local
wage per diem, the statute neither defined
the term "prevailing wage per diem" nor
furnished a standard for ascertaining such
a wage.
In Department of Finance v. Cohen, 369
111. 510, 17 N.F..2d 327, the statutory power
to impose a tax penalty was upheld, and in
Department of Finance v. (iandnlfi, 375
111. 237, 30 N.F..2d 737, the authority to en-
ter tax-deficiency assessments was ap-
proved. However, the amounts of the pen-
alties in these cases were determined pure-
ly by application of an arithmetical formu-
la.
We would note also that under the
Workmen's Compensation Act (III.Rev.
Stat.1971, ch. 48, par. 138.19(k)) if there
has been any unreasonable or vexatious de-
lay of payment due under the Act, the In-
dustrial Commission may award compensa-
tion additional to that payable under the
Act equal to 50% of the award. We have
never passed on the constitutionality of the
Commission's having been given this power
to penalize, but this court has upheld pen-
alties imposed by the Commission. See
Board of Education v. Industrial Comm.,
351 111. 128, 184 N.E. 202; Dyer v. In-
dustrial Comm., 364 111. 161, 4 N.E.2d 82.
We have already noted, in comments
quoted from Cooper and Davis, the impor-
tance given by courts to the presence or
absence of provisions for judicial review
of administrative action, when considering
questions of improper delegations of pow-
ers. Opportunity for judicial review cer-
tainly has been influential in the decisions
-------
298
152
311 NORTH EASTERN REPORTER, 2d SERIES
of this court when claim* have l>ocn made
that delegation* to administrative agencies
have violated the separation of powers.
This has been described by Hraden and
Cohn in their Illinois Constitution: An
Annotated and Comparative Analysis
(1%°), prepared for the Illinois Constitu-
tion Study Commission:
"As a general rule, delegation to ad-
ministrators or agencies of the quasi-ju-
dicial power to adjudicate rights or to
revoke privileges such as licenses is not
invalid so long as there is an opportunity
for judicial review of the administrative
action. Such judicial review normally
permits an aggrieved party to contest the
fairness of the procedure used, the con-
stitutionality of the substance of the reg-
ulatory statute and implementing rules
and regulations, the correctness of the
administrator's interpretation of the stat-
ute under which he operates, and wheth-
er or not his decision was arbitrary. In
short, if the judiciary is given an ade-
quate opportunity to review what has
been done, the principle of separation of
powers—or due process of law, if you
will—is generally satisfied." Braden and
Cohn, at 104-105.
[4] Turning to the Environmental Pro-
tection Act, we consider that the authority
given the Board to impose monetary penal-
tics does not violate the constitutional sep-
aration of powers. The interpretations
given the separation doctrine by this court
and by the Supreme Court of the United
States, the decisions approving delegations
of authority to impose civil penalties, the
detailed hearing and related provisions of
the statute, the Act's providing for ade-
quate judicial review, and the statute's es-
tablishment of protective guidelines that
the Board must follow in imposing penal-
ties, direct this conclusion.
To consider some of the Act's provi-
sions: It separates the investigative and
prosecuting body, the Environmental Pro-
tection Agency, from the adjudicative
body, the Board. (Ill.Rev.Stat.1971, ch.
\\\y2. pars. inrVl-HXM.) The statute re-
quires notice to be given of ronipl.-iinfs
filed with the Hoard. (III.Kcv.Stat.l'>7l,
ch. llH/2, par. 1031 (a).) At the public
hearing, which is required, the parties have
a right to be rcprcsentated by counsel, to
cross-examine witnesses, and to exercise
subpoena power, and the standard of ad-
missibility for evidence is the standard un-
der the law of rules of evidence in civil
actions. Ill.Rcv.Stat.1971, ch. HH/$, pars.
1031, 1032; Pollution Control Board Regu-
lations 301-33.1.
As additional protection against arbitrar-
iness, and as guidelines for the Board, the
Act provides that:
"In making its orders and determina-
tions, the Board shall take into consider-
ation all the facts and circumstances
bearing upon the reasonableness of the
emissions, discharges or deposits involved
including, but not limited to:
(i) the character and degree of injury
to, or interference with the protection of
the health, general welfare and physical
property of the people;
(ii) the social and economic value of
the pollution source;
(iii) the suitability or unsuitability of
the pollution source to the area in which
it is located, including the question of
priority of location in the area involved;
and
(iv) the technical practicability and
economic reasonableness of reducing or
eliminating the emissions, discharges or
deposits resulting from such pollution
source." Ill.Rev.Stat.1971, ch. llli/^, par.
1033(c).
[5] The Act provides that the findings
and orders of the Board are reviewable by
the appellate court under the Administra-
tive Review Act (IH.Rev.Stat.1971, ch.
111J4, par. 1041; ch. 110, par. 275 ct seq.).
The court may consider all questions of law
and fact in the entire record. Cases re-
viewed and the holdings include: Citizens
-------
299
Utilities Co. v. Pollution Control Board, 9
Ill.App.3d 158, 289 N.E.2d 642 (Board may
not impose monetary penalty as a condition
to granting a variance); Secgren v. En-
vironmental Protection Agency, 8 IH.App.
3d 1049, 291 N.E.2d 347 (Board's finding
is not supported by the evidence); Mc-
Intyre v. Pollution Control Board, 8 III.
App.3d 1026, 201 N.K.2d 253 (Board's
finding is not supported by the evidence),
and North Shore Sanitary Dist. v. Pollu-
tion Control Board, 2 IH.App.3d 797, 277
N.E.2d 754 (Board cannot base its findings
on information not in the record).
The people of this State have expressed
their determination to preserve and im-
prove the environment. Article XI of the
Constitution of 1970 provides:
"Section 1. Public
Responsibility
I 'ol icy—Legislative
The public policy of the State and the
duty of each person is to provide and
maintain a healthful environment for the
benefit of this and future generations.
The General Assembly shall provide by
law for the implementation and enforce-
ment of this public policy.
Section 2. Rights of Individuals
Each person has the right to a health-
ful environment. Each person may en-
force this right against any party, gov-
ernmental or private, through appropri-
ate legal proceedings subject to reason-
able limitation and regulation as the
General Assembly may provide by law."
The Environmental Protection Act, en-
acted in 1970, is consistent with the com-
mand of section 1 of article XI. An agency
to make investigations throughout the State
and present complaints of environmental
abuse was provided. A Board was created
to conduct hearings and to make appropriate
determinations and orders, including the im-
position of penalties. The Act obviously
contemplates a specialized statewide and
uniform program of environmental control
and enforcement. The legislature consid-
ered this could be more readily brought
Jll N.E.Ztf—10V*
I". 153
about if the responsibility of imposing pen-
alties was placed on the same authority
that conducted hearings and determined vi-
olations.
[6] The Board is to conduct hearings
and, if violations arc found, appropriately
it is to impost- penalties. The legislature.
may confer those powers upon an adminis-
trative agency that arc reasonably neces-
sary to accomplish the legislative purpose
of the agency (Department of Public
Works and Buildings v. Lantcr, 413 111. 581,
587, 110 N.E.2d 179; Rcif v. Barrett, 355
III. 104, 133, 188 N.E. 889), and we consider
that it was appropriate to give the Hoard
the authority to impose monrt.iry penalties.
There arc adequate standards provided
and safeguards imposed on the power giv-
en the Board to impose these penalties.
The granting of this authority does not
constitute an unconstitutional delegation of
judicial power.
For the reasons given, the judgment of
the appellate court is reversed.
Judgment reversed.
-------
300
APPENDIX C
SUMMARY
AN EVALUATION OF THE PRESENT
AND POTENTIAL USE OF CIVIL
MONEY PENALTIES AS A SANCTION
BY FEDERAL ADMINISTRATIVE AGENCIES
by
Harvey J. Goldschmid
Associate Professor of Law
Columbia University School of Law
Prepared for
COMMITTEE ON COMPLIANCE AND
ENFORCEMENT PROCEEDINGS
ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
November 17, 1972
-------
301
The increased use of civil money penalties in recent years
constitutes an important and salutary trend. The civil penalty
provides an ideal flexible sanctioning tool: it avoids the
stigma of criminal conviction and the harshness of "all or
nothing" remedies such as license revocation while it works as
an effective deterrent against offensive behavior.
Despite the growing popularity of civil penalties, federal
agencies have not yet devised an imposition system capable of
handling such cases fairly and efficiently. The vast majority
of agencies today must be successful in a de novo adjudication
in a district court before any penalty can be imposed. This
process is cumbersome and time-consuming for the agencies and
highly unsatisfactory for many alleged offenders, who will often
settle out of court for a slightly reduced assessment despite a
belief in their own innocence in order to avoid heavy litigation
expenses. On the other hand, many of the worst offenders are
able to escape virtually unscathed by employing a host of devices
designed to further prolong the enforcement process.
One solution to the problem is to allow the agencies them-
selves to impose the penalties. Under this system, an agency
would provide for an adjudicatory proceeding pursuant to Section
5-8 of the Administrative Procedure Act and adopt rules of practice
to maximize the chance of securing just, speedy and inexpensive
adjudications. An agency's decision would be final unless
appealed within a stipulated number of days. The decisions would
stand if supported by substantial evidence. The adversarial and
decisional functions of the agency would of course be made
separate, and procedures for mitigation and compromise would
be retained.
There are no significant constitutional barriers to such a
system.
------- |