United Stales National Enforcement
Environmental Protection Training Institute
Agency Washington, DC 20460
vvEPA
PRACTICE HANDBOOK
Administrative Enforcement at EPA
D Strategies
D Tools
D Resources
A DESK REFERENCE FOR EPA ADMINISTRATIVE
PRACTICE LAWYERS Second Edition: February 1,2000
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A note to our readers:
This Second Edition of our NETI PRACTICE HANDBOOK:
Administrative Enforcement at EPA is dedicated to the hundreds of men and
women: lawyers, case development professionals and witnesses who develop, file and
litigate administrative enforcement actions at the U.S. Environmental Protection
Agency. Over the years, more than 20,000 administrative penalty actions have been
initiated under the EPA's Consolidated Rules of Practice, 40 CFR Part 22. These
formal administrative penalty actions have recovered millions of dollars in penalties,
environmental beneficial activities, supplemental environmental projects and most
important, compliance with federal environmental requirements.
Significantly, each case represents the opportunity for formal contact with a
member of the regulated community. Whether it be a major, multi-national
corporation facing millions of dollars in proposed penalties or a pro se party charged
with a $500 claim, each case gives us, the administrative practice bar at EPA, the
opportunity to demonstrate that our administrative law enforcement program is fair,
affords full due process and gives each party the opportunity for their day in court.
Administrative enforcement litigation is more than trial tactics or court
strategy.. Much of the administrative litigation practice is devoted to motions practice,
anticipating and addressing defenses, challenges to evidence and frequently, assaults on
agency policy or discretion. Administrative Law, like any body of law, thrives on
precedent. This PRACTICE HANDBOOK is designed to help you use previous
precedent and guidance in effectively litigating administrative enforcement actions.
I am grateful to Helene Ambrosino, Senior Attorney, who has taken the time
and effort to compile this Second Edition Handbook, which is distinguished by its
through and comprehensive treatment of EPA administrative precedent in a plain
language, user friendly format.
Michael J.Walker
Senior Enforcement Counsel
for Administrative Litigation
Washington, D.C.
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TABLE OF CONTENTS
Chapter! Administrative Hearings 1
a. Background 1
b. Administrative Enforcement at EPA 1
c. Administrative/Civil/Criminal Enforcement 2
Chapter n. Information Gathering 4
a. Inspections 4
b. Administrative Warrants 4
c. Statutory Information Gathering Authorities 5
d. Going "On-line" 6
e. Subpoenas 6
Chapter m. 40 CFR Part 22 Consolidated Rules of Practice 8
a. Complaints.... 8
b. Answers : 11
c. Identity of Respondents 12
d. Prima facie case/Burden of proof. 13
e. Preheating Exchange/Discovery 14
f. Evidence 18
g. Motions 20
1) Motions for Default 20
2) Motions for Accelerated Decision
and Motions to Dismiss 22
3) Motions to Strike 23
4) Motions to Reopen a Hearing 23
5) Motions to Withdraw Complaint 24
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6) Motions to Amend 24
7) Motions to Intervene 25
h. Filing/Service and Time Limitations 25
i. Hearings 26
j. Settlements 27
k. Initial Decision 29
1. Interlocutory Appeals 30
m. Appeals as of Right 31
n. Final Order/Exhaustion of Administrative Remedies 32
Chapter IV. Common Defenses/Arguments 33
a. Ability to Pay/Appropriateness of the Penalty 33
b. Bankruptcy 34
c. Constitutional Defenses 35
d. Deference to Agency Interpretations 36
e. Estoppel, Res Judicata, Laches, etc 36
f. "I didn't know" or 'It was such a small violation" 37
g. Statute of Limitations/Continuing Violations 39
h. Paperwork Reduction Act 41
i. EPA Policies as Defenses 44
Chapter V. Statutes with Impact 47
a. Equal Access to Justice Act 47
b. Small Business Regulatory Enforcement Fairness Act 49
Chapter VI. The Decision-Makers 51
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a. Administrative Law Judges 51
b. Regional Judicial Officers 51
c. Environmental Appeals Board 52
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CHAPTER I. Administrative Hearings
a. Background
An administrative enforcement action is a hearing before a Federal Agency. All Federal
Agencies have administrative enforcement authorities, which can be found in the statutes the
Agencies are mandated to enforce. The statutes will authorize enforcement of its provisions by
use of the judicial process or, in the alternative, will authorize a hearing before the Agency before
or in lieu of judicial action. Most statutes will require that the administrative enforcement action
comply with the requirements of Section 554 of the Administrative Procedure Act ("APA"), 5
U.S.C. Sections 551 et seq. The APA provides a check and balance on the power of federal
agencies and Section 554 sets forth general hearing procedures. It is also possible for a statute to
authorize an administrative hearing which does not have to comply with Section 554 of the APA.
These "non-APA" hearings must still protect fundamental rights to due process but in a much less
formal way than more traditional administrative enforcement hearings.
The intent of authorizing administrative law enforcement is to allow Agencies with
specialized and/or technical expertise in an area of the law to process a large number of cases
efficiently and effectively while protecting a Respondent's right to due process without having to
use the judicial branch of government. Ultimately an administrative case may be appealed to the
judicial forum. However, well over ninety percent of administrative actions are resolved at the
Agency without further appeal.
b. Administrative Enforcement at EPA
There are many types of administrative hearings conducted within EPA. TSCA, FEFRA,
EPCRA, RCRA, CERCLA, CWA, C AA as well as the Marine Protection Research and
Sanctuaries Act all authorize EPA to enforce these statutes and collect civil penalties by way of
APA hearings. These hearings are conducted using the "Consolidated Rules of Practice
Governing the Administrative Assessment of Civil Penalties and the Revocation or Suspension of
Permits". 40 CFR Part 22. This procedural rule will be discussed in detail below. There are
several other types of administrative hearings conducted at EPA, including.
a. Merit Systems Protection Board - 5 CFR Section 1201 et seq.
b. Equal Employment Opportunity Commission - 29 CFR Section 1613.
c. Listing or Delisting under the C AA or CWA - 40 CFR Part 15.
d. Debarment and Suspension under EPA Assistance Programs - 40 CFR Part 32.
e. Assessment and Collection of Noncompliance Penalties under Section 120 of
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the CAA - 40 CFR Part 66 makes Part 22 applicable once a hearing is granted.
f. Control of Air Pollution from Mobile Sources - 40 CFR Part 85.
g. Spill Prevention Control and Countermeasure Hearings - 40 CFR Part 114.
h. Procedures for Decision making under CWA, RCRA, SDWA (UIC) and CAA -
40 CFR Part 124.
i. SDWA decision making - 40 CFR Part 142.
j. FIFRA - Registration, Classification, Cancellation, etc. - 40 CFR Part 164.
k. Ocean Dumping Permits - 40 CFR Part 220
1. RCRA Correction Action Orders for Interim Status Facilities - 40 CFR Part 24.
m. Equal Access to Justice Act - 40 CFR Part 17
c. Administrative/Ovil/Criminal Enforcement
In an administrative forum, EPA can request that a Final Order be issued which assesses a
penalty upon the Respondent. Generally, no other type of relief can be requested. With few
exceptions, EPA does not have injunctive authority in the administrative context and has no
criminal enforcement authority in administrative cases. When EPA proceeds administratively, it
has made the determination that assessing a penalty will provide the necessary deterrent effect.
Penalties assessed vary widely. The lowest penalties typically appear in FIFRA cases due to the
statutory limitations. However, in E.I. DuPont De Nemours & Company. Docket No. FIFRA-95-
H-02 (April 30,1998) Judge Kuhlman imposed a $1.895 million dollar penalty for knowingly
shipping four pesticides that failed to include required worker protection standard label warnings.
This is the largest fine ever imposed by an EPA judge in the history of EPA.
The statute proscribes when an the administrative enforcement process is to be used. The
other options are civil judicial enforcement and criminal enforcement. Some statutes authorize the
EPA to exercise discretion as to whether administrative or civil judicial enforcement is chosen in a
particular case or in particular kinds of cases. Criminal enforcement, on the other hand, is the
appropriate enforcement response whenever the Agency has some evidence of a knowing, willful
violation of the law. In such a situation, the Agency may still choose to proceed administratively.
In the case of knowing and willful violations, it is still a case by case determination as to whether
to proceed criminally or administratively.
Occasionally, EPA receives information after it has filed an administrative complaint that
indicates a need to switch forums. For example, after a case is filed administratively EPA may
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get information that a violation was knowing and willful and therefore could/should be prosecuted
criminally. Or perhaps EPA receives information that Respondent is continuing its non-compliant
behavior and an injunction is needed. In City of Cambridge, Water Pollution Control Center,
Docket No. 5-CWA-97-021 (April 29, 1998) Judge Moran granted EPA's Motion to Withdraw a
complaint Without Prejudice where EPA asserted that it needed to pursue injunctive relief.
EPA may want to switch forums, but it is not always possible. In Alaska Pulp
Corporation and Technic Services. Inc.. Docket No. 10-97-0042-CAA (March 26, 1998) Judge
Gunning denied a joint motion for a stay in administrative proceeding which was filed to allow 18
months for a criminal investigation. The Judge ruled that 22.04(c) specifically directs the ALJ to
avoid delays and there was nothing in the record to indicate that a criminal investigation could
conclude within 18 months. In City of Mandeville. Louisiana. Docket No. CWA-VI-97-1620
(July 14,1998) Judge Pearlstein denied EPA's Motion to Withdraw the Complaint and held that
there was no evidence in the record which would explain why, at this juncture in the proceeding,
EPA would want to switch forums to pursue injunctive and civil penalty relief in federal court.
No new evidence had been offered to explain EPA's motivation and it was the ALJ's belief that
EPA may have been motivated by a desire to simply increase the amount of the penalty above the
administrative cap of $125,000 to the statutory maximum of $4,250,000. In this situation, the
Judge held that granting EPA's Motion would cause Respondent legal prejudice by its exposure
to much higher civil penalties and, therefore, denied the motion. Get as much information as
possible before filing an action and choose the forum wisely!
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CHAPTER n. Information Gathering
a. Inspections
Information is gathered to form the basis of an administrative complaint in several ways.
Commonly, information is gathered during an authorized inspection and recorded in an inspection
report. In almost all programs, EPA conducts neutral and random inspections in an effort to
detect instances of noncompliance. Occasionally, EPA will receive a "tip and complaint" from a
citizen which can be followed by a 'Tor cause" inspection. EPA's ability to conduct regulatory
and statutory compliance inspections derives from the statute which forms the basis of the
inspection. For example, TSCA Section 11, FIFRA Section 9 and RCRA Section 3007 all
authorize EPA to conduct compliance inspections. These inspection authorities have been given
to EPA as part of its legislative mandate to promote public health, safety and welfare. Members
of regulated industries have a reduced expectation of privacy and must operate knowing that they
can and will be subject to compliance inspections by EPA.
Take a look at these cases that have important rulings with respect to inspections. In
Litton Industrial Automation Systems. TSCA Appeal No. 93-4 (January 27, 1995), the EAB ruled
that voluntary consent to a TSCA inspection conducted by State employees eliminated any Fourth
Amendment objections. An inspector may or may not be an EPA employee. State inspectors,
properly authorized by EPA, are valid inspectors. In Lefton Iron & Metal Company. Docket No.
TSCA-V-C-55-1991 (February 23, 1996) Judge Greene issued an Order Upon Cross Motions for
Summary Judgment. The complaint charged Respondent with refusing to allow an authorized
EPA representative to conduct an inspection and take soil samples hi an effort to determine
compliance with PCB regulations. The Judge held that EPA has the authority to conduct a PCB
inspection even where a facility denies that it manufactures, processes, stores or holds PCBs, but
where there is a reason to believe that PCBs may be found. The Judge ruled that the presence of
some rain and the presence of an Illinois EPA representative does not make the inspection
unreasonable under TSCA Section 11. The fact that it was a religious holiday does not make the
inspection unreasonable since there was no evidence the facility was observing a religious holiday.
In AvriL Inc.. Docket No. IF&R ffl-441-C (March 24,1997) Judge Pearlstein rejected
Respondent's argument that an inspection was improper where (1) Respondent failed to object to
an inspection at the time of the inspection (2) signed the inspectors notice of inspection
voluntarily (3) the notice of inspection clearly stated a violation was suspected and (4) the notice
of inspection was presented to Respondent before actually undertaking the inspection.
b. Administrative Warrants
An administrative warrant is an Order from the judicial Court, enforceable by the law
enforcement community, that authorizes the EPA to conduct an inspection. Typically, an
administrative warrant is sought after the regulated entity has refused entry for an inspections or
when it is believed that the regulated entity will refuse entry. Generally, if an entity refuses to
allow an EPA inspector to enter, the inspector has several options. The inspector may try to
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reschedule the inspection, or have his or her supervisor or a staff attorney call a company
representative to negotiate entry, or the EPA may seek an administrative search warrant. An
actual refusal is not always required to obtain an administrative search warrant. The language of
the statute at issue will govern whether or not a prior refusal is needed.
"Probable cause" is needed to obtain a warrant. However, "probable cause" may be based
on a showing of specific evidence of an existing violation; or on a showing that the inspection is
being conducted pursuant to a general administrative plan, derived from neutral sources, for the
enforcement of a statute. Marshall v. Barlow. 436 U.S. 307 (1978). Administrative probable
cause will be found if the application supports a "reasonable belief that the act was violated.
Matter of Midwest Instruments Co.. 900 F.2d 1150 (7th Cir. 1990). The court will require some
information that will support the inspector's suspicions that a violation has actually occurred
before it will consider EPA's belief reasonable. If the warrant is being sought as part of a general
administrative plan to conduct inspections, information will have to be provided to the court
describing how the particular facility to be searched was chosen for the inspection. Brock v.
Gretna Machine & Ironworks. Inc.. 769 F.2d 1110 (5th Cir. 1985)
Practitioners who intend to rely on specific evidence of a violation as probable cause, will
find that the courts are split on whether the scope of the search should be limited to the substance
of the alleged violations. In one case, an EPA warrant was considered overbroad where it
authorized access to documents of any type. Matter of Investigation Pursuant to Clean Air Act.
728 F.Supp. 626 (D.Idaho 1990). On the other hand, earlier cases have found that a warrant is
not overbroad where it authorized government to go anywhere at a facility to look for certain
violations. B.P. Oil Inc. v. Marshall. 509 F.Supp. 802 (E.D.Pa. 1981)
There are three documents needed to obtain a warrant. First, EPA must prepare an
"Application for Warrant" which constitutes the legal memorandum explaining EPA's entitlement
to the warrant including statutory authorities, key facts and the scope of the inspection proposed.
Second, EPA must provide affidavits in support of the type of probable cause which is being used
to justify the warrant. Finally, EPA must submit a proposed warrant authorizing the inspection.
Once a warrant is executed, EPA is responsible for providing the court with a form listing an
inventory of all items seized as well as a "return of warrant" form. If evidence of a criminal
violation is detected during the execution of an administrative warrant, it will be necessary to
obtain a criminal warrant. Appendix A contains the first administrative warrant issued pursuant to
EPCRA
c Statutory Information Gathering Authorities
Several statutes authorize EPA to gather information separate and distinct from Part 22's
prehearing exchange requirements. For example, TSCA Section 1 l(c) authorizes EPA to
subpoena any information it deems necessary to carry out its mandate under TSCA. CERCLA
Section 104(e) authorizes EPA to require the submission of information relating to, in pertinent
part, the identification, nature and quantity of materials generated, treated, stored or disposed
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and/or the nature or extent of a release or threatened release of a hazardous substance, pollutant
or contaminant. RCRA Section 3007(a) authorizes EPA to require any person who generates,
stores, treats, transports, disposes of, or otherwise handles hazardous wastes to submit, upon
request, information relating to such wastes. In Petroleum Wholesale, Inc., Docket No. UST6-
93-100-AO-l(October 18,1995) Judge Vanderheyden held that the use of a RCRA information
request was not a blatant circumvention of the stay on prehearing exchange that was instituted in
the proceeding since EPA clearly has the statutory authority to seek information using RCRA
Section 9005(a) as long as the information sought falls within the scope authorized by that
section.
Additionally, Respondents can use the Freedom of Information Act to gather their own
information for their case. In Spang and Company. Docket No. RCRA-III-169 (August 20,
1997) Judge Moran denied a Respondent's Motion for Discovery since, in part, the documents
Respondent sought were the subject of a FOIA request for which EPA was working on a
response.
Finally, the new Part 22 codifies the holdings of the above-cited cases. In 22.19(e)(5) the
rule states that "[njothing in this paragraph (e) shall limit a party's right to request admissions
or stipulations, a respondent's right to request Agency records under the Federal Freedom of
Information Act, 5 U.S. C. 552 or EPA 's authority under any applicable law to conduct
inspections, issue information request letters or administrative subpoenas, or otherwise obtain
information ".
d. Going "On-line"
There are several useful data bases that can be accessed in order to gather information for
a case. However, to use the information gathered from a database as evidence in a Part 22
proceeding the practitioner will have to satisfy the 22.22(a) criteria. Specifically, it must be
shown that the information is not irrelevant, immaterial, unduly repetitious, or otherwise
unreliable or of little probative value. In Paul Durham d7b/a Windmill FIU1 Estates Water System,
Docket No. [SDWA]-C930036 (April 14,1997) Judge Biro found that the Safe Drinking Water
Information System was reliable mainly because it is a federal database which was created to
contain the information gathered pursuant to a statutory and regulatory mandate. Other reliable
databases include the Toxic Release Inventory ("TRT) and Dunn & Bradstreet Reports.
e. Subpoenas
Once a case is underway, a practitioner may want to use a subpoena to gather information
for use at hearing or during pre-hearing exchange. However, a subpoena is available ONLY if
authorized by the statute being enforced. For example, in TIFA Limited. IF&R Docket No. U-
547-C (October 19,1998) Judge Biro denied Respondent's request to subpoena a witness and
ruled that there was no authority under FIFRA for an administrative law judge to issue a
subpoena. The supplemental rules to Part 22 identify those statutes that have subpoena authority
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- EPCRA, some CAA, RCRA, etc. Even where there is statutory authority, it must be exercised
by the agency correctly or the ALJ's will not allow the subpoenas. In ARCO Chemical Company,
Docket No. EPCRA-JJI-240 and CERCLA-JH-027 (March 8, 1999) Judge Moran quashed EPA
subpoenas ruling that it was clear they were not issued for the limited purpose identified in
CERCLA 122(e)(3)(B) and, therefore, EPA must use the discovery rules available in Part 22.
Where a statute has subpoena authority, the corresponding supplemental rule will govern
how it is exercised in Part 22. The party requesting the subpoena must satisfy the criteria listed in
the applicable supplemental rule. In Lav Brothers. Inc.. Docket No. EPCRA-IV-97-067 (July 21,
1999) Judge Gunning denied Respondent's request for a subpoena because it failed to satisfy
22.40(b)(l) which required a showing of the ground and necessity for, together with the
materiality and relevancy of the evidence to be adduced. See ARCO Chemical, Docket No.
EPCRA-m-240 and CERCLA-HI-027 (March 8, 1999).
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CHAPTER ffl. 40 CFR Part 22 Consolidated Rules of Practice
The Consolidated Rules of Practice ("Part 22") constitute the procedural rule used in
EPA's administrative enforcement proceedings to assess administrative penalties as authorized by
statute. First promulgated on April 9,1980 at 45 Fed. Reg. 24360, it is the only applicable
procedural rule in these proceedings. The Federal Rules of Civil Procedure are frequently relied
upon as guidance where Part 22 is silent. However, the Federal Rules of Civil Procedure are not
controlling.
On July 23, 1999, the Consolidated Rules of Practice were amended. The amendments
contain mostly technical revisions to make them consistent with current practice and easier to use.
There are no large substantive changes to the way EPA conducts administrative hearings.
However, several changes are very important and will be highlighted in the appropriate sections.
a. Complaints - 40 CFR 22.13 and 22.14
Before a complaint is drafted every Practitioner MUST conduct a thorough assessment of
the case. A complaint should not be issued until the Practitioner is able to do two things: (1)
completely satisfy all of the requirements contained in 40 CFR 22.14 AND (2) set out aprima
facie case in the complaint, supported by evidence. Part 22.14 tells us that every proceeding must
begin with a complain and that each complaint shall include:
(I) A statement reciting the section(s) of the Act authorizing the issuance of the
complaint;
(2) Specific reference to each provision of the Act and implementing regulations
which respondent is alleged to have violated;
(3) A concise statement of the factual basis for alleging the violations;
(4) A description of the relief sought, including one or more of the following:
(i)The amount of the civil penalty which is proposed to be assessed, and a
brief explanation of'theproposedpenalty;
(ii) Where a specific penalty demand is not made, the number of violations
(where applicable, days of violation) for which a penalty is sought, a brief
explanation of the severity of each violation alleged and a recitation of
the statutory penalty authority applicable for each violation alleged in the
complain;
(iii)A request for a Permit Action and a statement of its proposed terms
and conditions; or
(iv)A request for a compliance or corrective action order and a statement
of the terms and conditions thereof;
(5) Notice of respondent's right to request a hearing on any material fact
contained in the complaint or on the appropriateness of any proposed penalty,
compliance or corrective action order or Permit Action;
(6)Notice ifsubpartlofthispart applies to the proceeding;
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(7) The address of the Regional Hearing Clerk; and
(8)Instructions for paying penalties, if applicable. "
40CFR22.14(a).
This section was changed during the 1999 amendments to reflect a change in the way EPA
may request relief. Before the amendments, all complaints proposed a specific penalty amount.
The new rule offers EPA the option of holding back its specific penalty demand until a later date
(22.19 requires EPA to make a specific penalty demand during prehearing exchange where none
was made in the complaint). One reason for this change was to allow EPA to make a specific
penalty demand using information that frequently comes in only after a complaint is filed. This
may lead to more realistic penalty demands since financial information that may impact the
calculation is often given to EPA post-complaint. There is NO GUIDANCE on when and under
what circumstances EPA should choose one option over the other. A good rule of thumb for the
practitioner wrestling with which way to go is this - if you have reliable financial information and
your case is straightforward with little likelihood that new information will change the calculation,
plead a specific penalty amount. Otherwise you may want to seriously consider exercising the
option to wait.
Whatever you decide with respect to pleading penalties, you must comply with 22.14 in its
entirety. In BCM Engineers. Inc.. Docket No. TSCA-ffl-694 (June 24, 1994) Judge Nissen
dismissed EPA's complaint without prejudice for failure to comply with 22.14(a)(3) and
22.14(a)(5). Although the Judge held that dismissal with prejudice is proper only where the
defects in a complaint are not curable by amendment, a dismissal without prejudice may save your
case but makes you look like a sloppy practitioner and starts the whole case off on the wrong
foot. Further, not all Judges agree on this point. In Kalamazoo Regional Psychiatric Hospital and
the Michigan Department of Mental Health. Docket No. CAA-020-92 (April 26,1995) Judge
Green ruled that 22.14 was not procedural only and that the failure to comply with that section
could be fatal to the ability to impose a penalty. Further, penalty calculation was EPA's burden of
proof which is not waived by Respondent's failure to raise a 22.14(a)(5) defect in its Answer.
It is useful to have a checklist at the pre-complaint stage. Not only does a good checklist
help to organize your thoughts, but it will ensure that you never accidentally omit one of the
required 22.14 elements nor any necessary element for your prima facie case. If you maintain this
list throughout the proceeding it will prove useful at many different stages. Start by listing each
element of proof. For each element, identify the corresponding statutory or regulatory section
numbers. For each element, list the actual pieces of evidence you have which satisfy your burden
of proof. Be sure to include notes on the weight of that evidence. Clearly mark the entire
document ATTORNEY WORKPRODUCT. Typical items of evidence are:
1) Inspection report. Be sure Notices of Inspection were properly filled out and signed.
2) Witness lists. Be sure to note the availability and credentials of each witness.
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3) Chain of custody documentation. Be sure that chain of custody forms were properly
filled out and actually evidence an unbroken chain.
4) Financial information.
5) Check, check and double check to make sure you have properly identified the
Respondent. Who is named as the Respondent will be governed, generally, by the statute or
regulation at issue. In 501 Madison Associates and JMJ Cross Enterprises. Docket No CAA-II-
94-0110 (October 13, 1995) Judge Hoya agreed with EPA that naming respondents is a matter
within its prosecutorial discretion and, therefore, Respondent's motion to add parties was
improper.
6) Penalty Calculation Worksheet. If the practitioner plans to specify a penalty in the
complaint, a calculation worksheet should be prepared pre-complaint. It's a good idea to begin
the worksheet in all cases in order to help with the decision on pleading penalties. However,
22.19(a)(3) and (4) require EPA to explain during prehearing exchange how its proposed penalty
complies with the criteria in the Act. Therefore, the worksheet should be ready and available no
later than prehearing exchange. When the rule refers to compliance "with the criteria in the Act",
in practical terms, it is referring to EPA's use of Enforcement Response Policies ("ERP's"). All
programs, with the exception of the Clean Water Act, have ERP's. The ERPs are tools to use in
calculating penalties and reflect EPA's position on the application of the statutory penalty factors
to cases brought under that statute. The ERPs are not confidential and we encourage
practitioners to share them freely with Respondents so that they understand how the penalty was
calculated. In CWA cases the penalty is calculated through other means. In Pleasant Hills
Authority. Docket No. CWA-JU-210 (November 19,1999) Judge McGuire held that there is no
specific formula in the CWA, the implementing regulations or in any applicable penalty policy for
calculating penalties under Section 309. Therefore, he looked at prior EAB and federal court
decisions as guidance in recommending a penalty.
22.14(c) addresses EPA's need to sometimes amend its complaint. There are several
reasons why a complaint may need to be amended. In The Mavline Company. Docket No. RCRA
Docket No. V-W-26093 ( December 15,1994) Judge Lotis held that EPA's statutory duty to
consider good faith efforts to comply and to make the necessary adjustment to the penalty does
not end with the filing of the complaint. If information becomes available after the complaint is
filed which demonstrates Respondent's good faith, EPA must immediately disclose such
knowledge and adjust the penalty accordingly. Judge Moran agreed in Tebav Dairy Company.
Docket No. EPCRA-IJJ-236 (August 3,1999). An amendment may be necessary whenever new
information is acquired by the agency that materially effects the complaint. In Pepperell
Associates. Docket No. CWA-2-I-97-1088 (September 16, 1998) Judge Gunning ruled that,
although Part 22 does not provide a standard for when a complaint may be amended, the EAB has
held that leave should be freely given to amend in accord with the liberal policy of FRCRP 15(a)
as it promotes accurate decisions on the merits of each case. Include a copy of the amended
complaint with your Motion to Amend. In Ultramar Diamond Shamrock Corp.. Docket No.
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UST-99-001-AO-1 (November 23,1999) Judge Gunning held that a mere description of what the
amended complaint will contain upon amendment is not sufficient.
b. Answers- 22.15
A Respondent who wishes to respond to a complaint must submit a written Answer hi
accordance with 22.15. When it comes to pro se Respondent's, ALJs tend to be more lenient
with the requirements to conform their Answer to 22.15. For example, hi Bilmax Properties and
Upright Wrecking. Docket No. 5-CAA-029-98 (February 5, 1999) Judge Biro denied EPA's
Motion for Default and held that two letters which admitted liability but claimed inability to pay,
mailed by the due date, constituted an Answer. With the exception of extending Respondent's
time to answer a complaint from 20 days to 30 days, the 1999 amendments did not change 22.15.
An Answer can be filed if the Respondent wishes to contest any material fact, contest the penalty
or argue that he is entitled to judgment as a matter of law. Section 22.15(b) sets forth that "ftjhe
answer shall clearly and directly admit, deny or explain each of the factual allegations
contained in the complaint -with regard to which respondent has any knowledge. Where
respondent has no knowledge of a particular factual allegation and so states, the allegation is
deemed denied. The answer shall also state (1) the circumstances or arguments which are
alleged to constitute the grounds of defense, (2) the facts -which respondent intends to place at
issue, and (3) -whether a hearing is requested. "
Study an Answer carefully to detect all admissions in order to determine whether or not
the case is ready for a Motion for Accelerated Decision. See discussion on Motions for
Accelerated Decision. Remember that where a Respondent fails to admit, deny or explain any
material factual allegation it constitutes an admission of that allegation. Where a Respondent fails
to admit or deny and provides a clearly inadequate explanation, EPA may be able to successfully
argue that this is equivalent to an admission.
If a Respondent fails to request an oral hearing in its Answer, the Respondent will not be
entitled to one. However, note that most, if not all, of the ALJ's feel that a Respondent is
entitled to an oral evidentiary hearing on penalty even where it was not specifically requested.
All of the ALJs have uniformly held that defenses raised in an Answer must be supported
by actual evidence. Complainant should strenuously object to and file a Motion to Strike defenses
which are unsupported bare assertions. For example, hi Wooten Oil Company, Docket No. CAA-
94-H001 (January 31, 1996) Judge Hoya ruled that naked denials and disclaimers of insufficient
knowledge rendered the Answer fatally inadequate under Part 22. Denials and disclaimers must
be supported by a statement of circumstances, arguments or factual challenges. Respondent was
allowed to amend its Answer hi Wooten. The ALJ hi La Barge. Docket No. CWA-VTJ-91-W-
0078 (February 5,1996) rejected Respondent's "form book" affirmative defenses for being "bare
assertions". In 1833 Nostrand Avenue. Docket No. [UST] H-RCRA-0205 (February 6, 1996)
the ALJ held that where Respondent intended to raise certain affirmative defenses, it bore the
burden of producing evidence of those defenses. However, in Titan Wheel Corp. of Iowa.
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Docket No. RCRA VJI-98-H (August 6, 1999) Judge Moran held that to the extent an Answer
asserts pure legal theories (ie. statute of limitations) and does not rely upon the testimony of
witness nor the introduction of exhibits in support, an explanation in the Answer is not needed.
c. Identity of Respondents
A Respondent is "any person against whom the complaint states a claim for relief 40
CFR 22.3. The person proceeded against in the complaint will be governed by the statute which
forms the basis of the complaint. A party may appear in person or by counsel or by other
representative. Persons who appear as counsel or representative must conform to the standards
of conduct and ethics required of practitioners before the courts of the United States. 40 CFR
22.10.
When it comes to corporate Respondents, consider parent and subsidiary liability,
especially if it is suspected that there may be ability to pay issues. Take a look at Gold Crest
Chemical Corp. And Embalmers Supply. Docket Nos. EPCRA-m-0160 and CERCLA-m-002
(June 14, 1994) in which Judge Head sets forth a thorough analysis of the corporate successor
liability case law. More recently, in Standard Forgings Corp. and Trinity Industries. Inc.. Docket
No. TSCA-V-C-080-92 (March 21,1997) Judge Kuhlman ruled that a parent company's close
and controlling role when environmental issues arise at the subsidiary demonstrate that it is a
necessary and appropriate party. Naming corporate officers or employees should also be
considered. Whether an individual can be liable will be governed by the statute or regulation.
However, there are advantages to naming these individuals as co-Respondents, especially for
family or closely-held businesses and may be necessary when a "company" is not formally
incorporated. For example, where a business is bankrupt or is threatening to declare bankruptcy,
naming corporate or family individuals who are not subject to the bankruptcy proceeding will help
to insure that fines are collectable or that remedial actions are carried out.
With the proper evidence it may be possible to "pierce the corporate veil" and proceed
against individuals or other entities. In Safe & Sure Products Inc. And Lester J. Workman.
Docket No. IF&R 04-907003-C (June 26,1998) Judge Moran pierced the corporate veil to hold
Respondent Lester Workman personally liable. EPA was able to prove that Mr. Workman had
failed to maintain adequate corporate records or minutes, the corporation paid for the individual's
obligations, there was a commingling of funds and affairs and there was a diversion to
noncorporate uses, there was a disregard of legal formalities and a failure to maintain an arms-
length relationship among related entities - all establishing that the corporation did not function
independently of Mr. Workman. This case was affirmed by the EAB on appeal. FIFRA Appeal
No. 98-4 (July 27,1999). See also, Heating Oil Partners. L.P.. Docket No. CWA-JJI-199
(September 21, 1998) for a good discussion of the substantial continuity theory of successor
liability and see 1836 Realty Corporation. Docket No. CWA-2-I-98-1017 (November 6,1998)
where the ALJ allowed access to financial information of "interrelated companies and individuals.
You may notice that EPA is bringing actions against federal facilities more and more. This
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is due, in part, to more statutory authority in this area. Generally, the same Part 22 rules apply to
federal Respondents as they do to all other respondents. In United States Air Force. Tinker Air
Force Base. Docket No. UST-6-98-002-AO-1 Judge Gunning denied Respondent's Motion to
Dismiss and held that Executive Order 12146 (which requires executive branch agencies to submit
legal disputes to the US Attorney General prior to going to court) does not bar a Part 22
proceeding.
d. Prima facie case/Burden of proof - 40 CFR 22.24
Over the years there have been several ALT and EAB decisions impacting which party
bears what burden in an administrative proceeding under Part 22. The 1999 amendments to Part
22 changed the language of 22.24 in an effort to make it consistent with current practice resulting
from these decisions. EPA has two burdens as the complainant in an administrative action. Part
22.24 states that, "The complainant has the burdens of presentation /prima facie case7 and
persuasion that the violation occurred as set forth in the complaint and that the relief sought is
appropriate. " The Respondent also has burdens. "Following the complainant's establishment of
a prima facie case, respondent shall have the burden of presenting any defense to the allegations
set forth in the complaint and any response or evidence with respect to the appropriate relief.
The Respondent has the burdens of presentation and persuasion for any affirmative defenses. "
Whether or not a party has sustained its burden is decided by the ALJ based upon a
preponderance of the evidence. Part 22.24(b) states, "Each matter of controversy shall be
determined by the Presiding Officer upon a preponderance of the evidence. " 40 CFR 22.24. A
preponderance standard is considered a "more likely than not" standard. The ALJ needs only to
believe that it is "more likely than not" that the matter is as the party is arguing it to be, in order
to find a preponderance.
In order to establish a. prima facie case against a Respondent, EPA must allege facts
sufficient to establish each element of the violation to be charged and have each element
supported by evidence. Each case will rest on the evidence in the record. In J. V. Peters and
Company et seq.. RCRA (3008) Appeal No. 95-2 (April 14, 1997) the EAB held that it is the
substance, not the form, of the evidence which determines whether a prima facie case has been
made. Where EPA has failed to plead a prima facie case in the complaint, Respondent will file a
Motion to Dismiss for failure to state a cause of action. In Microban Products Company, Docket
No. FIFRA-98-H-01 (May 18,1998) Judge Moran held that a Motion to Dismiss requires
Respondent to show that EPA failed to state a prima facie case. This motion is almost always
aimed at a simple pleading problem that can be corrected by amending the complaint. Most
Judges will allow an amendment to cure any procedural defects in the complaint and deny such a
Motion to Dismiss. However, this problem could be avoided entirely by careful pleading at the
outset ensuring that a prima facie case is set forth in the complaint.
The Supreme Court addressed the question of what, exactly, is a "burden of proof'. In
Department of Labor v Collieries, 62 LW 4543 (June 20,1994) the Supreme Court held that
Section 7(c) of the APA requires "[e]xcept as otherwise provided by statute, the proponent of a
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rule or order has the burden of proof' and further, the legal term of art "burden of proof means
the burden of persuasion. The only time the burden of persuasion may shift is in the case of
affirmative defenses. EPA's administrative complaints are requests for the Agency decision-
maker, and perhaps ultimately a Court, to issue an Order against a Respondent. Therefore, EPA
bears the "burden of proof' as to the violation and the appropriateness of the penalty.
When it comes to establishing the appropriate penalty, the EAB has held that EPA does
not bear a separate burden for each statutory factor it is charged with considering before it
assesses a penalty. Rather, the burden of proof attaches to the overall appropriateness of the
penalty. In New Waterburv. TSCA Appeal No. 93-2 (October 20, 1994) the EAB ruled that EPA
bears the burden of proof regarding the "appropriateness" of a penalty and simply must,
"consider", among other statutory factors, the "ability to pay". To establish aprimafacie case
EPA must go forward with some evidence that each statutory factor was considered. Ability to
pay may be presumed until it is put at issue by respondent However, at hearing EPA must go
forward with some evidence on respondent's general financial status from which it can be inferred
that respondent's ability to pay should not affect the penalty amount. "Inability to pay" is not an
affirmative defense. Although New Waterburv allows EPA to presume ability to pay at the
outset, it is strongly recommended that Practitioners gather as much financial information as they
can at the pre-complaint stage.
See also, Diehl v. Franklin. 826 F.Supp. 874 (D.N.J. 1993); DarrmvFDTC 970 F.2d 71 (5th Cir.
1992), Merritt v. Federal Maritime Commission. 960 F.2d 15 (2nd Cir. 1992), Bosma v.
Department of Agriculture. 754 F.2d 804(9th Cir. 1984) These courts have explicitly held that
inability to pay a penalty is not an affirmative defense and, therefore, the burden of proof does not
shift to Respondent.
& Preheating Exchange/ Discovery -40CFR22.19
The 1999 amendments to Part 22 did change the language of 22.19. The new 22.19 is
more comprehensive and is now consistent with current prehearing exchange practice. As stated
previously, it is during prehearing exchange that EPA must specify a proposed penalty amount
where none had been identified in the complaint. Also, 22.19(a) now reiterates a provision that
appears in 22.22 on evidence. Specifically, 22.19(a) now states that, "Parties are not required to
exchange information relating to settlement which would be excluded in the federal courts under
Rule 408 of the Federal Rules of Evidence". No matter where this appears in the rule - beware -
there are several reasons settlement information would NOT be excluded under Rule 408 and,
therefore, could come in to a Part 22 proceeding (ie. to prove bias, unclean hands, etc.)
Prehearing exchange occurs after the Answer is filed and is the opportunity in the process
for the parties to provide each other with the information that will be relied upon at hearing.
Remember, however, that this information is not actually evidence until it is formally admitted
into evidence at a hearing. It is for this reason that some ALJ's do not grant Motions to Strike
things from prehearing exchange, arguing that such a Motion to Strike is premature and would
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not be ripe until a party tries to Move to Admit the [document, witness testimony, etc.] into
evidence. Don't let the approach of some ALJ's deter a Motion to Strike since other ALJ's have
stricken things from pre-hearing exchange as a matter of law. For example, where a Respondent
included many examples of settlements in other cases, the ALJ granted a motion to strike on the
grounds that those other cases would not and could not qualify as "evidence" as defined by 40
CFR 22.22. See 1836 Realty Corporation, Docket No. CWA-2-I-98-1017 (April 8, 1999).
Most information is exchanged through a prehearing exchange and not through a
prehearing conference. The rule requires both parties to exchange copies of all exhibits it intends
to introduce at hearing and a list of witnesses and a brief summary of their expected testimony.
Via a scheduling order, the ALJ will most likely order the Respondent to provide financial
information if it intends to raise the issue of ability to pay the penalty. An ALJ may direct the
parties to participate in a conference, which would typically take place over the telephone. A
party may request a conference. A conference could be a useful tool to encourage the exchange
of certain exhibits, simplify issues,generate stipulations of fact and promote settlement.
If either party seeks more information then has been exchanged during prehearing
exchange a 22.19(e) motion must be filed requesting "other discovery". Such a motion will be
granted by the ALJ only upon a showing "(i) That such discovery will not in any way
unreasonably delay the proceeding; (ii)That the information to be obtained is not otherwise
obtainable; and (iii)That such information has significant probative value. " Furthermore, if
depositions are sought, they will be ordered only upon a showing of good cause and upon the
additonal finding that "(i)The information sought cannot be obtained by alternative methods; or
(ii) There is a substantial reason to believe that relevant and probative evidence may otherwise
not be preserved for presentation by a witness at the hearing". The standards for a 22.19(e)
motion have intentionally been made high to reduce unnecessary discovery. In administrative
actions it is permissible to limit the exchange of information in an effort to have streamlined, yet
fair, adjudications. While the rules try to prevent endless discovery and Respondent's "fishing
trips", sometimes further discovery is ordered. In Stanchem Inc.. Docket No. CWA-2-I-95-1040
(October 14, 1998) Judge Nissen granted a Respondent's request for depositions and documents
in its effort to prove estoppel against the government despite the Judge's belief that an estoppel
argument would not be successful!
A motion for other discovery will not be granted until prehearing exchange is concluded.
In Rogers Corporation. Docket No. TSCA-I-94-1079 (November 8, 1996) Judge Head ruled that
until the prehearing exchange has occurred an ALJ cannot conduct a proper evaluation as to
whether the criteria in 22.19(f) [now 22.19(e)]have been satisfied. Judge Gunning agrees in
Lvon County Landfill Docket No. 5-CAA-96-011 (July 18, 1997) and Richard M. Stern et sea..
Docket No. 5-TSCA-97-007 (August 1, 1997).
When compiling prehearing exchange pay close attention to detail, be thorough, comply
with the ALJ's order and make sure adequate information is provided. Nothing is gained by
cutting corners during prehearing exchange. In Coleman Trucking. Inc.. Docket No. 5-caa-96-
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005 (February 7, 1997) Judge Charneski granted Respondent's request to depose EPA's expert
witnesses and ruled that the description of the witnesses expected testimony contained in EPA's
prehearing exchange was inadequate and it would be unfair to require Respondent to prepare for
hearing where it may have to guess as to the prospective testimony of EPA witnesses. In Henry
Velleman and d/b/a Progressive Poletown Properties. Docket No. 5-CAA-97-008 (March 18,
1998) Judge Gunning ruled that the purpose of prehearing exchange is to afford the parties a fair
and full opportunity to prepare for and to participate in the hearing. This can only be achieved if
the prehearing exchange conveys sufficient information concerning the testimony of each witness
and each proposed witness' connection to the case. Enough information must be given so as to
notify the party as to the general substance and context of the testimony of each witness.
Don't hold back information that should be exchanged. In administrative practice there is
no need for "surprise" tactics. In feet, view prehearing exchange as an opportunity to showcase
EPA's case in an effort to convince the Respondent that its best course of action is to settle.
While prehearing exchange may be supplemented to add information, several of the ALJs do not
allow supplementation freely. In Rogers Corporation. Docket No. TSCA-I-94-1079 (February
27,1997) Judge Gunning ruled that, although the parties prehearing exchanges contained the
typical phrase reserving the "right" to supplement prehearing exchange, supplementing prehearing
exchange would be allowed only in "extraordinary circumstances" and only if filed before a date
specified in the Order. So don't assume supplementation is a right. Good cause will need to be
shown why the information was not exchanged during the prehearing exchange period.
There has been a fair amount of litigation over the interpretation of several of the terms in
22.19(f) [now 22.19(e)]. For example, in E.I, du Pont de Nemours & Company. Docket No.
FIFRA-93-H-09 (June 30,1995) Judge Hoya ruled the legal term of art "significant probative
value" used in 22.19(f)(l)(iii) is sufficiently akin to "relevant evidence" used in the Federal Rule
of Evidence 401 and, therefore, would be allowed as long as the discovery sought would tend to
make the existence of any fact more or less probable than without the requested discovery. In
Commercial Cartage Company. Docket No. CAA-93-H-002 (August 22, 1996) Judge Mssen
ruled that only the following items would have the requisite "significant probative value" required
by 22.19(f): federal and state tax returns for the past three years and a current financial statment,
all loan applications and loan documents for all outstanding loans to Respondent. EPA's requests
for depreciation schedules, charts of accounts, general ledger, trial balances, lease agreements,
sales agreements, bills of sale, deeds of assets sold within the last five years, bank statements were
all held to lack "significant probative value".
There has also been a fair amount of litigation over the types of information that may be
exchanged and the kinds of information that are discoverable under 22.19. For example, in Agri-
Fine Corporation. Docket No. EPCRA-V-019-92 (September 1,1995) Judge Nissen ruled that
the EPA's position on the potential for harm to the environment and the community resulting
from the failure to report de minimis releases of sulfuric acid was not discoverable as it related to
matters of policy set by Congress in the statute. Confidential or sensitive documents can be
exchanged. ALJ's use various means to protect the confidentiality of certain information. For
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example, in Dennis Anderson Construction Corp.. Docket No. CAA-IH-025 (June 6,1994) Judge
Head issued a Protective Order so that the parties may use a confidential document in discovery in
such a way as to protect it from unauthorized disclosure. In Safety-Kleen Corp.. Docket Nos. V-
W-003-93;V-W-004-93;V-W-005-93 (July 1, 1994) Judge Hoya held that EPA documents
sought by Respondent were discoverable under 40 CFR 22.19(f)(l), but in camera inspection
revealed that they were protected by the attorney-client and the deliberative process privileges,
and that these privileges had not been waived by EPA's reference to the contents of the
documents. However, FOJA and the various "privileges" cannot be used to improperly shield
documents. In Borough of Naueatuck. Docket No. 2-1-97-1017 (March 25,1998) Judge
Pearlstein ordered EPA to disclose two documents that had been withheld as covered by FOIA's
deliberative process privilege. The Judge held that such a claim was uncertain and, where there is
doubt, the matter should be resolved in favor of disclosure. The Judge could not conceive of any
injurious effect on agency deliberations arising from the disclosure of memos which simply give
the reasons behind a nationwide policy. In First Capital Insulation, Inc., Docket No. CAA-JJI-076
(July 28, 1998) Judge Charaeski considered ability to continue in business before assessing the
penalty, but redacted the financial analysis because it was considered CBI. The new 22.22(a)(2)
and 22.19(e)(5) codifies many of these concepts.
Using 22.19 is not the only way to gain access to information once a complaint has been
issued. In Dominick's Finer Foods. Inc.. Docket No. [CERCLA]/EPCRA-007-95 (February 15,
1996) Judge Charneski ruled that the discovery rules of 22.19(f) are independent from EPA's
authority to gather information under CERCLA. EPA may not be enjoined from exercising its
statutory investigative authority to request information solely because of the pendency of a related
administrative action. Likewise, a Respondent may use the Freedom of Information Act during
the pendency of a Part 22 proceeding. In fact, 22.19(e)(5) specifically codifies theses holdings.
If a party fails to comply with a prehearing exchange order, serious repercussions may
result. A party can be found in default under 22.17. If the party is the complainant, the complaint
can be dismissed with or without prejudice. If the party is the respondent, liability may be found.
As stated in 40 CFR 22.19(g), the ALJ also has the authority to draw adverse inference from a
party's failure to produce certain information, or he or she may exclude the information. In
Ocean State Asbestos Removal Inc. Et seq.. Docket No. CAA-I-93-1054 (February 28, 1996)
Judge Pearlstein warned the Respondent that its failure to provide adequate financial information
during prehearing exchange could lead to adverse inferences being drawn against it.
There has been a fair amount of discussion over the practice of some ALJ's to order
"staggered" pre-hearing exchange. That is, the EPA is ordered to file its pre-hearing exchange
before the Respondent. Historically, pre-hearing has always been "simultaneous", where both
parties file simultaneously. Some ALJ's still order simultaneous filing. The type of pre-hearing
exchange is completely at the discretion of the ALJ. Whichever one is ordered, EPA must
comply. Pre-hearing exchange should not be a hardship for a practitioner who has thoroughly
prepared pre-complaint and has kept files in good condition. In Ridgewood Providence Power
Partners. Docket Nos. RCRA-I-98-1031 and CWA-2-I-98-1030 (April 27,1999) the ALJ denied
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EPA's motion for simultaneous pre-hearing exchange and held that staggering the pre-hearing
exchange is more efficient since it follows the statutory burdens of presentation and allows
Respondent to limit its evidence to the issues raised by EPA's evidence. The ALJ flatly rejected
the argument that staggeied pre-hearing exchange gives Respondent a time advantage.
/ Evidence- 40 CFR22.22
Whether or not something is admissible as evidence will depend on whether it satisfies the
criteria set forth in 22.22(a). 40 CFR 22(a) sets forth that, "The Presiding Officer shall admit all
evidence which is not irrelevant, immaterial, unduly repetitious, or otherwise unreliable or of
little probative value, except that evidence relating to settlement which would be excluded in the
federal courts under Rule 408 of the Federal Rules of Evidence is not admissible ". The Federal
Rules of Evidence are used as guidance but are not controlling. Generally, in a Part 22
proceeding more types of information can be admitted into evidence than would be allowed in
federal court. For example, the rule against hearsay does not apply in Part 22 proceedings. In
Rogers Corporation. Docket No. TSCA-I-94-1079 (February 27,1997) Judge Gunning ruled that
the hearsay rule is not applicable to administrative hearings so long as the evidence upon which a
decision is ultimately based is both substantial and has probative value.
As stated in the above discussion of Prehearing Exchange/Discovery, most ALJs have held
that issues of admissibility must be addressed at hearing. In Seneca Asbestos Removal et seq.
Docket No. CAA-010A-1993 (February 6, 1996) Judge Head held that questions of the
admissibility of evidence are more appropriately dealt with at hearing and not before. Before an
evidentiary hearing is held several ALJ's feel motions on admissibility are premature.
Parties have litigated almost every aspect of the admissibility of evidence. Take a look at
the following cases. They all have important holdings that go to admissibility or the weight of
evidence.
* In General Electric. Docket Nos. TSCA-DI-520;TSCA-V-C-93-90, 94-90 &9-
90;TSCA-VL477C;TSCA-1090-02-14-2615 (August 30,1994) EPA was ordered to produce a
penalty witness by Judge Nissen who held that presenting evidence on calculating the appropriate
penalty is not "a useless exercise unduly lengthening the transcript, but an essential aspect of a
respondent's right to a hearing hi accordance with the APA. This right may not be abrogated by a
"ploy" that EPA counsel calculated the proposed penalties".
* In J.V Peters and Company et sea.. RCRA (3008) Appeal No. 95-2 (April 14,1997)
the EAB held that the practice of using written testimony to establish at least portions of a direct
case is accepted in administrative proceedings and comports with due process and allowed EPA's
use of testimony from a 1984 hearing. The EAB held that the controlling inquiry is whether the
particular evidence satisfies 22.22(a),
* In Jeffrey Springer d/b/a Able Termite & Pest Control. Docket No. VH-1120C-91P
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(December 30, 1994) Judge Hoya ruled that Respondent could not be bound by admissions
contained in pre-litigation affidavits. Since Respondent was denying the allegations, the pre-
litigation affidavits can only be used as evidence at hearing to refute Respondent's defense.
* In Haveman Grain Company and Dan Haveman, Docket No. IF&R-VH-1211C-93P
(July 7, 1995) Judge Nissen ruled that when an Amended Answer is filed, the original Answer is
superseded and of no legal effect. Therefore, EPA's may not rely on admissions contained in the
original Answer. The Judge also issued a similar holding in Agri-Fine Corp., Docket No.
EPCRA-V-019-92.
* In Jamaica Water Supply Company and Dynamic Painting Corporation. Docket No. II
RCRA-93-0212 (November 25, 1996) Judge Lotis ruled that it was acceptable for EPA to use
reports or records which are required to be filed or kept by law as admissions to establish liability.
Unsupported speculation of error on those records is insufficient to defeat them as admissions.
* In Paul Durham d/b/a Windmill Hill Estates Water System, Docket No. [SDWA]-
C930036 (April 14, 1997) Judge Biro ruled that the "mysterious database" known as the Safe
Drinking Water Information System was a reliable source of information in this proceeding and
admitted into evidence information from this database. Although the information in this federal
database, created pursuant to statutory and regulatory mandate, constitutes hearsay, it is well
established that hearsay is admissible in administrative proceedings.
* In Mulberry Farms. Inc.. Docket No. EPCRA-IV-95-108 (December 23,1996) Judge
Nissen ruled in this EPCRA 313 case involving the failure to file forms that "the filing of forms be
a regulated entity upon demand from a government agency does not necessarily prove that the
company was obligated to submit (or resubmit) the forms, nor does such filing reflect an
admission that the documents were not previously filed and possibly lost by the State Emergency
Response Commission." If EPA is going to allege Respondent failed to file forms it must support
that allegation with documentation such as an affidavit from the custodian of the records or some
other official at the SERC that the filings were never received or located.
The Judges differ with respect to how easily each will allow evidence to be supplemented
after a hearing. In ICI Americas. Inc & Dodge City Cooperative Exchange. Docket No. JJ&R
Vn-1191C-92P (September 20, 1994) Judge Vanderheyden ruled that where a matter has not
progressed to the point of no return and where newly discovered evidence is likely to affect the
outcome of the proceeding, "newly discovered" evidence will be allowed to be introduced.
Practitioners should note that the new 22.22(a)(l) would not allow a party to try an introduce
evidence for a hearing at the last minute (considered less than 15 days before a hearing) unless
good cause is shown.
The new rule provides three possible repercussions for the failure to exchange
information under 22.19(g) - the Judge may draw an adverse inference, exclude the information
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from evidence or issue a defeult. The Judges differ in their treatment of a party who has failed to
provide evidence. A lot will depend on the circumstances. In Agri-Fine Corporation, Docket No.
EPCRA-V-019-92 (October 17, 1996) Judge Nissen ruled that, while Respondent cannot be
precluded from raising the issue of inability to pay at hearing, Respondent must provide EPA with
financial information prior to the hearing. The failure to provide EPA with the information will
result in Respondent being precluded from preferring evidence of its own and will be limited to
cross-examining EPA's witnesses. Further, the Judge ruled that tax information which shows
gross revenues and expenses, balance sheets or statements of cash flow from the current year or
information from general business sources, such as Compustat, Dun and Brandstreet or Value
Line should enable EPA to establish a prima facie case as to Respondent's ability to pay.
g. Motions:
There are a variety of motions that can be made in a Part 22 proceeding. Some are
mentioned specifically in the rules and others are not. The general rules governing motions are
found at 40 CFR 22.16 and set forth that "All motions, except those made orally on the record
during a hearing, shall (1) be in writing; (2) state the grounds therefor with particularity; (3) set
forth the relief or order sought; and (4) be accompanied by any affidavit, certificate, other
evidence, or legal memorandum relied upon. Such motions shall be served as provided by
Section 22.05(b)(2). " In the new 22.16, a response to a motion is due within 15 days of service
of the motion and allows the movant 10 days to reply to a written response. The failure to
respond to a motion may be deemed a waiver of any objection to the granting of the motion.
Before an answer is filed, the Regional Administrator (or his or her delegatee) rules on all
motions. Typically, the Regional Presiding Officer is delegated this authority. The Environmental
Appeals Board rules on motion filed after the initial decision is served. The AU assigned to the
case rules on all other motions. Oral argument on motions is not common and would occur only
if the decisionmaker would consider it necessary.
A motion is simply a request for the AU to making a ruling. Part 22 does not limit the
types of motions that can be made. As a result we have seen some novel motions. The most
common motions are as follows:
1) Motions for Default -22.11
"A party may be found to be in default; after motion, upon failure to file a timely answer
to the complaint; upon failure to comply with the information exchange requirements of22.19(a)
or an order of the Presiding Officer; or upon failure to appear at a conference or hearing.
Default be respondent constitutes, for purposes of the pending proceeding only, an admission of
all facts alleged in the complaint and a waiver of respondent's right to contest such factual
allegations. Default by complainant constitutes a waiver of complainant's right to proceed on
the merits of the action, and shall result in the dismissal of the complaint with prejudice ".
22.17(a). Motions for default can lead to harsh results - so beware!
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The Judges differ in their approaches to default. Some will grant default motions fairly
easily while others strenuously resist imposing what they believe is a very harsh sanction. In Jay
Harcrow. Docket No. UST6-91-031-AO-1 (September 25, 1995) Judge Pearlstein held that
submitting financial documents late is insufficient reason to impose the drastic remedy of a default
order or to strike the defense of inability to pay. Default orders are not favored by the law and,
generally, cases should be decided on their merits whenever possible. What's more, where
Respondent has defaulted for failure to comply with a prehearing order, at least one Judge has
held that the complaint must allege a cause of action and sufficient facts to establish the violation
before a Default Order will be issued. Mountain States Asbestos. Docket No. CAA-H-94-0106
(May 1, 1997).
Where a party has failed to answer or comply with an order, typically the Presiding Officer
will provide one or more opportunities for the party to come into compliance by way of issuing an
Order to Show Cause. The Order to Show Cause will order the party to file its delinquent
pleading and provide a good reason why the deadline was missed or be subject to a Default
Order. Usually if the party adequately responds to an Order to Show Cause no default will issue.
Complainants are just as subject to defaults as are Respondents. ALJs are less tolerant of
defaulting complainants then they are of defaulting Respondents on the theory that, as the
proponent of the proceeding, Complainant must diligently prosecute the matter every step of the
way. Missing a deadline could result hi a case being dismissed with prejudice. See United Septic.
Inc.. Docket No. CWA-5-99-005 (January 4, 2000) where Judge Biro dismissed a case with
prejudice when EPA missed a deadline.
Once a Default Order is issued it may be set aside only "for good cause shown ". 40 CFR
22.17(d). "Good cause" is not always so easy to show. In Rvbond. Inc.. RCRA (3008) Appeal
No. 95-3 (November 8, 1996) the EAB ruled that Appellant had failed to articulate a reason why
appearing pro se should justify vacating a properly issued default, especially where Respondent
had an attorney at one time and made a conscious decision to discontinue their services.
For a text book example of what needs to be shown for a defensible default proceeding
see Capitol Electric Construction and Donald Sekelsky and Sekelskv Enterprises Co.. Docket No.
TSCA-I-92-1062 (November 15, 1994). Be sure your complaint satisfies 22.14 and you have set
forth a prima facie case, if you want to prevail on a motion for default (of course, EPA
practitioners will be doing this anyway!). In Ace Environmental. Inc.. Docket No. CAA-IJJ-093
(June 24, 1999) Judge Bullock held that, before granting a default motion, it must be established
by a preponderance of the evidence that the violation occurred as set forth in the complaint -
otherwise, no default. Although, in Bio-Scientific Specialty Products. Inc.. IF&R Docket No. U-
557-C (August 19, 1999) Judge Gunning ruled that were the default is based on a failure to
comply with a prehearing order, there is no regulatory requirement that the EPA present sufficient
evidence to establish a prima facie case. This issue may or may not be resolved through the recent
amendment to 22.17(a) which eliminated the language referring to the complaints establishment of
a prima facie case. Some ALJs may still feel it a necessary burden on EPA.
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2) Motions for Accelerated Decision and Motions to Dismiss - 22.20
Motions for Accelerated Decision are basically the same as Summary Judgment Motions
in the judicial practice. It is the Complainant who files a Motion for Accelerated Decision and the
Respondent files a Motion to Dismiss. The rules set forth the requirements as follows, "The
Presiding Officer may at any time render an accelerated decision in favor of the complainant or
the respondent as to all or any part of the proceeding, without further hearing or upon such
limited additional evidence, such as affidavits, as he may require, if no genuine issue of material
fact exists and a party is entitled to judgment as a matter of law, as to all or any part of the
proceeding. In addition, the Presiding Officer, upon motion of the respondent, may at any time
dismiss an action without further hearing or upon such limited additional evidence as he
requires, on the basis of failure to establish aprimafacie case or other grounds which show no
right to relief on the part of the complainant. " 22.20(a)
Motions for accelerated decision are greatly encouraged in Part 22 practice. It has been
our experience that the greater the number of issues that can be resolved as a matter of law and
without a hearing, the simpler the remaining litigation will be. Further, simplifying the issues by
prevailing on as many allegations as possible greatly encourages Respondent's to come to the
settlement table. Remember that you can file a Motion for Accelerated Decision on one or two
counts, all of the counts or the whole case! Use this type of motion as a tool to chip away at the
case so that when hearing time comes only the truly contested issues will be presented.
Of course, there is a fair amount of litigation as to whether the movant has satisfied the
requisite criteria necessary to be granted its motion for accelerated decision. Most litigation on
this motion centers around whether or not the movant has established that (1) there is no genuine
issue of material fact and that (2) the party is entitled to judgment as a matter of law. (Emphasis
added.)
It is more common to see Motions for Accelerated Decision granted for liability issues.
The Judges are more hesitant when it comes to granting motions for accelerated decision on the
amount of the administrative penalty. Several of the ALJ's have held that there is always an issue
of fact with respect to the penalty and, therefore, a Respondent is always entitled to a hearing on
penalty. There are a few Judges who are willing to grant a Motion for Accelerated Decision on
penalty as well as liability, so it's always worth a try. Compare the following decisions of Judges
Greene, Nissen, Moran and Kuhlman. In Sam Emani d7b/a Auto Stop of Godbv Road. Docket
No. CAA-IV-93-007 (November 30,1994) Judge Greene granted EPA's Motion for Accelerated
Decision on penalty and held that when nothing of consequence would be gained by holding an
oral evidentiary hearing, an appropriate penalty would be rendered upon a motion for accelerated
decision. In Nemacolin Mines Corp et seq. Docket No. TSCA-JJI-426 (February 7,1996) Judge
Nissen held that it is well settled that determining the amount of a penalty on accelerated decision
is seldom, if ever, appropriate. Further, he dismissed as irrelevant the fact that the proposed
penalty was calculated in accordance with the applicable ERP. In Spang and Company, Docket
No. RCRA-IH-169 (August 20, 1997) Judge Moran held that a Respondent has an unequivocal
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right to a hearing once Respondent requests a hearing pursuant to 22.15(c). Take a look at the
decision hi Newell Recylcing Company. Inc.. TSCA Appeal No. 97-7 in which the EAB upheld
Judge Kuhlman's $1.345 million penalty assessed by granting EPA's Motion for Accelerated
Decision on Liability and Penalty!!
When responding to a Motion for Accelerated Decision or Motion to Dismiss all that
needs to be shown is that there is an issue of material fact remaining and/or the issue cannot be
decided as a matter of law. However, this needs to be shown through presentation of actual,
concrete evidence. In Bickford Inc.. Docket No. TSCA-V-C-052-92 (November 28, 1994) Judge
Vanderheyden granted EPA's Motion for Accelerated Decision on Liability and held that
Respondent's simple denial of liability is inadequate to demonstrate that an issue of fact does
indeed exist. To respond to a Motion for Accelerated Decision Respondent must produce
evidence which places the moving party's evidence in question and raises a question of fact for an
adjudicatory hearing. For example, in Taylor Lumber & Treating. Tnc Docket No. 10-97-0091-
RCRA EPA had provided inspection reports, affidavits and photos to support its motion for
accelerated decision on liability where it was arguing that Respondent's tram cars were not sitting
on drip pads and were leaking hazardous waste. The motion was denied since Respondent was
able to argue and support that it was not hazardous waste that was leaking and that the RCRA
rule only requires minimizing and not eliminating the tracking of contaminants.
3) Motions to Strike
Strategic use of Motions for Accelerated Decision and Motions to Strike are encouraged
because they tend to narrow and focus issues for litigation and promote settlement. However,
several Judges have held that granting a Motion to Strike is disfavored. For example, City of
Sioux Falls. SD. Docket No. CWA-VUI-93-03-P-n (July 13,1994) Judge Nissen ruled that
Motions to Strike are not favored and that even if allegations are redundant or immaterial they
should be stricken only if they are prejudicial to the moving party. In Shawano County. National
Service Cleaning Corp. and Grow Construction Managers. Inc., Docket No. V-5-CAA-013 (June
9, 1997) Judge Nissen ruled that motions to strike are not specifically authorized hi Part 22 and,
generally, such motions are not favored and should be granted only when there are no questions
of feet and any questions of law are clear and not in dispute. In Franklin and Leonhardt
Excavating Company, Docket No. CAA-98-011 (December 7,1998) Judge McGuire denied a
motion to strike ruling that they are not favored and should be denied unless the legal
insufficiency of a defense is clearly apparent (Respondent had argued estoppel and laches).
However, Judge Moran feels differently. In Indespec Chemical Corporation and Thermal
Services. Inc.. Docket No. CAA-DI-086 (December 5, 1997) Judge Moran ruled that in the
absence of guidance on Motions to Strike in Part 22, Federal Rule of Civil Procedure 12(f)
permits the striking of any insufficient defense or any immaterial or impertinent matter from any
pleading.
4) Motions to Reopen a hearing - 22.28
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A motion to reopen a hearing is uncommon. It is part of the procedural rule as a safety
valve, for both parties, and serves a valuable function in the unlikely event that new evidence
arises at the eleventh hour indicating that the Initial Decision was all wrong. Specifically, "A
motion to reopen a hearing to take further evidence must be made no later than twenty days after
service of the initial decision on the parties and shall (1) state the specific grounds upon which
relief is sought, (2) state briefly the nature and purpose of the evidence to be adduced, (3) show
that such evidence is not cumulative, and (4) show good cause why such evidence was not
adduced at the hearing. The motion shall be made to the Presiding Officer and filed with the
Regional Hearing Clerk". 22.28(a).
Once finished with a case, an ALJ is loath to reopen. In Ketchikan Pulp Company.
Docket No. CWA-1089-12-22-309(g) (September 5,1996) Judge Head ruled that motions to
reopen a hearing are not favored and the requirements of 22.28(a) would be strictly enforced.
The moving party must demonstrate good cause for its failure to produce at the hearing the
evidence now proposed to be offered. If the evidence could have been prepared before the
hearing it cannot be considered "newly discovered". If the moving party intends to rely upon
"mndamental fairness" or "the interests of justice" to support such a motion, they must show that
the preferred evidence would be likely to change the result In F C Haab Company. Docket No.
EPCRA-m-154 (November 24,1997) Judge Bullock ruled that a motion to reopen cannot be
used as a means for correcting errors in strategy or oversights at hearing.
5) Motion to Withdraw Complaint - 22 14(d)
Part 22.14(d) sets forth that a "complainant may withdraw the complaint, or any part
thereof, without prejudice one time before the Answer has been filed. After one withdrawal
before the filing of an answer or after the filing of an Answer, the complainant may withdraw the
complaint, or any part thereof, without prejudice, only upon motion granted by the Presiding
Officer." In Virgin Islands Water and Power Authority. Docket No. II-95-0107, Judge
Charneski held that such a motion could be granted where EPA's motion was filed within a
reasonable time, did not act in bad faith and Respondent would not experience any prejudice by
the withdrawal of the case. Before granting this motion the ALJ will consider the extent to which
the case has progressed, including the Respondent's efforts and expense in preparation and
participation.
6) Motion to Amend
The Parties may need to amend a pleading or other filing at various stages of the
proceeding. The rules for amending a complaint are found at 22.14(c). The rules for amending
an answer are found at 22.15(e). 22.19(f) deals with a party's ability to supplement its preheating
exchange information. Generally, where permission of the Presiding Officer is needed to amend,
it is granted where there is no prejudice that will result to the non-moving party. In Rogers
Corporation. Docket No. TSCA-I-94-1079 (November 13,1997) Judge Gunning ruled that, since
Part 22 does not provide a standard for determining when leave to amend should be granted, Rule
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15(a) of the Federal Rules of Civil Procedure sets forth that leave to amend will be given freely
when justice so requires. In one case, a motion to amend the complaint was granted after the
hearing was held! In Converse County Weed and Pest Control. Docket No. JJF&R VHI-95-283C
(August 5, 1997) Judge Kuhlman allowed the complaint to be amended to conform to the
evidence adduced at hearing.
7) Motion to Intervene
A motion to intervene is not a common occurrence in an administrative enforcement
proceeding at EPA. However, 40 CFR 22.11 does provide for motions for intervention and for
the filing of non-party briefs. Therefore, it is wise to be aware of its possibility and familiarize
yourself with the standards. In pertinent part, the rule authorizes intervention if, "the movant
claims an interest relating to the cause of action; a final order may as a practical matter impair
the movant's ability to protect that interest; and the movant's interest is not adequately
represented by existing parties". 22.11(a). To file a non-party brief, "any person who is not a
party to a proceeding.. . shall identify the interest of the applicant and shall explain the
relevance of the brief to the proceeding." 22.1 l(b) A standard was not provided as to when a
motion to file a non-party brief would be granted.
For a good discussion of intervention and the elements necessary to satisfy 22.11, see Port
ofAnacortes. Docket No. TSCA-10-96-0088 (June 9,1997) by Judge Nissen. See also,
Converse County Weed and Pest Control District. Docket No. IF&R VHI-95-382C (August 22,
1997).
h. Filing/ Service and Time Limitations -22.5
There are filing, service and tune requirements sprinkled throughout Part 22. However,
the general provisions governing filing, service and time are found at 22.5 through 22.7. The
requirements seem self-explanatory, however, there has been litigation over certain aspects of
filing and service. The most common problem in this area is the late filing of pleadings. For
example, in Outboard Marine Corp.. CERCLA Penalty Appeal No. 95-1 (October 11, 1995) the
EAB dismissed the EPA's appeal for being untimely filed. It was one day late! And hi Williams
Pipe Line and L & C Services. Inc.. CAA Appeal No. 97-3 (February 27, 1997) the EAB
dismissed EPA's Notice of Appeal as untimely. It was six days late! In Lvon County Landfill
Docket No. 5-CAA-96-011 (September 11, 1997) Judge Gunning ruled that an Answer must be
filed within 20 days of service of the complaint. Unlike service, filing is not complete upon
mailing. Filing and service have different requirements, although they basically serve the same
function. Respondent's assumption that its Answer was timely since it was mailed within the due
date was in error The Judge also ruled that faxing an Answer is a violation of 22.05(b)(2) since
faxing is not one of the authorized methods of service.
Other issues have come up as well. For example, a party must raise the issue of improper
service at the appropriate time or it is deemed waived. In Luverne Fire Apparatus Co., Docket
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No. CWA-Vm-94-19-PII (August 29,1995) Judge Vanderheyden held that even if service of the
complaint was improper, respondent waived any objection by not raising its challenge in its
Answer.
The repercussions of improper service of a complaint can be embarrassing. Avoid the
problem by familiarizing yourself with the service requirements for the different types of
Respondents. In PECO Foods of Mississippi. Inc.. Docket No. EPCRA-IV-93-234 (October 24,
1995) Judge Charneski dismissed a complaint due to EPA's improper service upon Respondent's
counsel rather than on an officer, partner, managing or general agent, or . . .any other person
authorized by appointment or by federal or state law to receive service of process as set forth hi
22.05(b)(lXii). The complaint is not dismissed with prejudice and, therefore, EPA was able to re-
serve the complaint properly. However, it gets the whole case off on the wrong foot and makes
complainant look sloppy before the AU.
Another common problem in this area is the filing of requests for an extension of tune. It
seems so simple yet practitioners often wait until the last moment, or worse, wait until after a due
date to file a request for an extension time. This is a mistake. The Judges have become
increasingly intolerant of this oversight and, in an effort to keep the cases moving, have really
cracked down on practitioners who have misused motions for extensions of time. The following
two cases illustrate two points to keep in mind. In Lackland Training Annex, Docket No. RCRA
VI-311-H EPA had filed a Motion to Request a Delay (otherwise known as a motion for
extension oftime/m filing prehearing exchange until a Motion for Partial Accelerated Decision
was ruled upon. On May 12,1995 Jude Nissen ruled that the absence of a ruling on the Motion
for Delay should not have been assumed by EPA to constitute a granting of that motion. EPA
should have either filed its prehearing exchange or obtained the ruling (by telephone would be
sufficient). In Gordon Head and William Spangler. Docket No. TSCA-V-C-057-93 (November
20, 1996) Judge Charneski ruled that failure to properly request an extension of time may result hi
a matter being dismissed for lack of prosecution. A motion for an extension of time must be filed
in advance of the date on which the pleading is due.
L Hearings
Part 22, Subpart D contains all of the procedural requirements governing the oral
evidentiary hearing. Not all Judges believe an oral evidentiary hearing is necessary. Some Judges
have held that a satisfactory "hearing" can be provided through pleadings alone. In SamEmani
dVb/a Auto Stop of Godbv Road. Docket No. CAA-IV-93-007 (August 31,1994) Judge Greene
ruled that an oral evidentiary hearing is not required on the penalty issue where it will not assist in
rendering a decision. It is sufficient if Respondent has been given a meaningful opportunity to
present its case in writing In Green Thumb Nursery. Inc.. FIFRA Appeal No. 95-4a (March 6,
1997) the EAB held that a person is not entitled to an evidentiary hearing unless that person-puts
a material fact at issue and demonstrates, through probative evidence, that the dispute is-
"genuine"
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If a Respondent wants a hearing, they must specifically request one in the Answer.
Otherwise, a hearing is held at the discretion of the ALJ. If a hearing is to be held, the Presiding
Officer issues a Notice of Hearing setting forth the time and place. The Presiding Officer must
give the parties at least thirty days notice before the hearing, which can be postponed only by
motion and for good cause shown. The location of the hearing is determined by 22.19(d) which
sets forth that it shall be, "held in the county where the respondent resides ro conducts the
business -which the hearing concerns, in the city in which the relevant EPA office is located, or in
Washington, DC unless the Presiding Officer determines that there is good cause to hold it at
another location in a region or by telephone. "
The hearing itself is similar in most respects to a judicial hearing. The parties rise when
addressing the Judge, make objections and offers of proof (see 22.23), make opening and closing
statements, examine and cross-examine witnesses. The hearing is transcribed (22.25). Unless the
cost is "unduly burdensome" each party pays for its own copy of the transcript.
Once the hearing is over, the parties get a second bite of the apple. 22.26 allows the
parties to submit to the Judge "proposed findings of fact, conclusions of law and a proposed
order, together with briefs in support thereof. This is slightly different from judicial practice
where briefs are filed before the trial. By allowing the briefs to be submitted after the hearing, it is
easier to conform the arguments to the evidence that came out (or failed to come out) at hearing.
j. Settlements - 22 18
EPA encourages settlement of cases to such an extent that it is codified at 22.18(a), "The
Agency encourages settlement of a proceeding at any time if the settlement is consistent with the
provisions and objectives of the Act and applicable regulations. " In fact, the majority of EPA
administrative cases are settled pursuant to 22.18. How to develop a settlement position is set
forth in general and statute specific Enforcement Response Policies.
All settlements must be in writing in the form of a "consent agreement" and be properly
executed. All consent agreements MUST contain the following elements, "respondent (1)
admits the jurisdictional allegations of the complaint; (2) admits the facts stipulated in the
consent agreement or neither admits nor denies specific factual allegations contained in the
complaint; and (3) consents to the assessment of a stated civil penalty or to the stated permit
revocation or suspension, and waives any right to contest the allegations and its right to appeal
the proposed final order accompanying the consent agreement." All settlements must conclude
with the issuance of a Final Order by the RJO, RA or EAB, as required by 22.18(b)(3).
The new 22.18 contains a "Quick Resolution" provision which allows a Respondent to
"settle" the case at any time by simply paying the proposed penalty in full. Please note that even
where this happens a Final Order still needs to be issued in accordance with 22.18(b)(3). Also,
22.13(b) authorizes the simultaneous filing and settling of a complaint through the use of a
properly executed CACO . Although the rule does not specify this, it would be prudent for the
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practitioner to designate the document as "Complaint and CACO" in order to make it clear what
is happening in the case and to simplify processing. Make sure this hybrid type of pleading
contains all the requirements of a complaint in 22.14 as well as a consent agreement. Identifying
that this one document has two functions will make the record clearer, will make docket
information clearer and will simplify processing the receipt of the penalty.
It is vital to note that EPA counsel DOES NOT have the authority to unilaterally settle a
case. While the signature of the EPA attorney frequently appears on the consent agreement, it is
a matter of properly delegated authority as to whom may sign-off on a settlement on behalf of
EPA. The individual who has the authority differs from region to region, but uniformly, it is not
the attorney. Occasionally, a Respondent will argue that EPA's attorney agreed to the terms of a
settlement. It should always be noted when discussing settlement with opposing counsel that,
while the attorney may recommend a settlement, EPA's attorney does not have the authority to
bind the agency and approval for the settlement will have to be sought. In Wyoming Technical
Institute. Docket No. RCRA(3008) VUI-95-10 (July 29,1997) Judge McGuire ruled that oral
agreements are not binding where agreements are required by statute or court rule to be in
writing. Further, the federal government is not bound by the agreements of its agents acting
beyond the scope of their authority. An EPA attorney does not have the authority, either actual
or apparent, to bind the complainant orally or in writing to any type of settlement. Therefore,
EPA would not bound by the oral representations of an agreement made by EPA counsel. Judge
Charneski came to the same decision in Indoor Air Quality. Inc. and Solomon Schechter Day
School of Philadelphia. Inc.. Docket No. CAA-UI-074 (September 18, 1997).
Once a case has settled through the use of 22.18 it concludes the proceeding. The parties
must live with the agreement as embodied in the Consent Agreement and Consent Order
("CACO"). In State of Connecticut. Department of Transportation. Docket Nos. RCRA-I-97-
1083 and 1084 (July 15,1998) Judge Pearlstein denied Respondent's Motion to Reopen a
Consent Order and ruled that once a CACO is issued, there is nothing in Part 22 that allows it to
be reopened. The CACO itself will, generally, provide that the parties waive rights to an
administrative hearing The ALJ no longer has jurisdiction over the matter once a CACO is
issued. However, the Judge suggested that another CACO may be able to abrogate, modify or
supplement the existing one.
Practitioners are reminded that they should treat settlement discussions as a formal part of
the entire administrative practice process and never to consider themselves "off the record". It is
true that 22.22 makes inadmissible anything relating to settlement which would be excluded in the
federal courts under Rule 408 of the Federal Rules of Evidence. However, this does not
completely close the door on evidence pertaining to settlement from coming into the record. See
discussion on Prehearing Exchange/Discovery.
The new Part 22 codified a practice that had been used for several years. Specifically,
22.18(d) authorizes willing parties to engage in the formal process known as Alternative Dispute
Resolution ("ADR"). The opportunity is provided by the ALJ's only once in the process and it
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usually occurs shortly after the Answer is received. Although the parties may choose anyone to
act as a neutral, it is usually an ALJ (one not assigned to the case). Choosing ADR does not
automatically stay the proceeding. If the proceeding is stayed, it is usually stayed for only a brief
time of definite duration (approximately 60 days). Whether or not to engage in ADR is a case by
case determination. Sometimes the process helps the small, unsophisticated Respondent since a
neutral can provide insights into the merits of the case, or lack thereof. When the Respondent is
more sophisticated or represented by experienced counsel they may encourage ADR merely as an
attempt to delay the overall proceeding. ADR can be a useful tool but it should be used in
addition to and does not replace the practitioners individual efforts to engage in settlement
discussion with Respondent.
k. Initial Decision -22 27
The Initial Decision is also known as a Recommended Decision since "the Presiding
Officer shall determine the amount of the recommended civil penalty based on the evidence in
the record and in accordance -with any penalty criteria set forth in the Act." It is the written
legal and factual conclusions of the trier of fact and includes a recommendation to the
Environmental Appeals Board as to the appropriate civil penalty, if any, and a final order. "The
initial decision of the Presiding Officer shall become the final order of the Environmental
Appeals Board-within forty-five (45) days after its service upon the parties and-without further
proceedings unless (1) an appeal to the Environmental Appeals Board is taken from it by a party
to the proceedings, or (2) the Environmental Appeals Board elects, suasponte, to review the
initial decision." 22.27(c)
Perhaps the most significant aspect of the procedural rule governing Initial Decisions is
22.27(b). In recommending a civil penalty the rule requires that the Presiding Officer determine a
dollar amount. "The Presiding Officer shall consider any civil penalty guidelines issued under
the Act. The Presiding Officer shall explain in detail in the initial decision how the penalty to be
assessed corresponds to any penalty criteria set forth in the Act. If the Presiding Officer decides
to assess a penalty different in amount from the penalty recommended to be assessed in the
complaint, the Presiding Officer shall set forth in the initial decision the specific reasons for the
increase or decrease." The "civil penalty guidelines" referred to in 22.27(b) are the Penalty
Policies, also known as the Enforcement Response Policies. While these policies, generally, have
not been "issued under the Act" in a technical sense, they are used by the Presiding Officers in the
manner referred to in 22.27(b). The Judges differ greatly as to how much weight to afford the
Enforcement Response Policies (ERPs). Some Judges believe that the ERPs merely embody legal
and factual argument made by one party to the proceeding and therefore, grant them as much
weight as they would to similar argument made by a Respondent. The requirement that the
Judges must consider the ERPs when setting a penalty does not turn the ERPs into binding rules.
The rules themselves specifically authorize the Judges to recommend a penalty which differs from
the one derived by application of the ERPs and proposed by complainant in the complaint. Of
course, the Judge is required to provide specific reasons for any increase or decrease from that
which was proposed by complainant. However, the Judge is not bound by EPA's Enforcement
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Response Policies.
Not only may the ALJ deviate from the proposed penalty, but the EAB has upheld the
decision of an ALJ who assessed a completely different kind of relief than that requested by EPA.
In Predex Corporation. FIFRA Appeal No. 97-8 (May 8,1998) the EAB upheld Judge Nissens
decision to issue a warning in lieu of a penalty and ruled that when the ALJ assesses a penalty that
falls within the range of penalties provided in the guidelines, the EAB will not substitute its
judgment for that of the ALJ absent a showing that the ALJ has committed an abuse of discretion
or a clear error.
I Interlocutory Appeals- 22..29
The rule allows interlocutory appeals only upon a motion to the Presiding Officer which
requests that a particular order or ruling be "certified" to the Environmental Appeals Board for
appeal. Simply stated, you must ask the Presiding Officer's permission before seeking an
interlocutory appeal. A party has ten days from service of the order to file a written request for
certification. The Presiding Officer will grant a Motion for Certification only when "the order or
ruling involves an important question of law or policy concerning -which there is substantial
grounds for difference of opinion, and (2) either (i) an immediate appeal from the order or
ruling will materially advance the ultimate termination of the proceeding, or (ii) review after the
final order is issued will be inadequate or ineffective." 22.29(b). These are not easy grounds to
satisfy and comports with the general notion that most issues should wait for an initial decision
before an appeal is filed so as to prevent any unreasonable delays in the proceeding. In Lackland
Training Annex. Docket No. RCRA VI-311-H (October 25, 1995) Judge Nissen denied
Respondent's request for certification of an interlocutory appeal holding that it is insufficient to
simply reiterate the arguments submitted in the prior pleading which resulted in the adverse ruling.
If the motion for certification is granted, in most circumstances the Presiding Officer does
not stay the remainder of the proceeding. Of course, there have been situations where a stay has
been imposed using the authority in 22.29(d) which states, "Proceedings will not be stayed except
in extraordinary circumstances. Where the Presiding Officer grants a stay of more than thirty
days, such stay must be separately approved by the Environmental Appeals Board". Stays have
been imposed in the past by Presiding Officers who don't want to rule on an issue of law which is
pending before the Environmental Appeals Board. Examples include stays imposed due to PRA
issues and statute of limitations issues.
If the motion for certification is denied, a party has two choices. Either (1) wait until
there is an initial decision and then appeal as of right or (2) use 22.29(c). 22.29(c) sets forth that,
"When the Presiding Officer declines to certify an order or ruling to the Environmental Appeals
Board on interlocutory appeal, it may be reviewed by the Environmental Appeals Board only
upon appeal from the initial decision, except when the Environmental Appeats Board
determines, upon motion of a party and in exceptional circumstances, that to deiav review woaki
be contrary to the public interest." This is an even higher hurdle than the criteria of 22.29(b)
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alone as the party will have to show that the Presiding Officer was in error and that delay would
be contrary to the public interest. Few motions have been filed under this paragraph and even
fewer granted.
m. Appeal as of right-22.3Q
Most appeals arise after the issuance of an initial decision. A party has thirty days after
service of the initial decision to file a Notice of Appeal and brief with the Environmental Appeals
Board. The procedural requirements are set out in 22.30. The Notice must summarize the order
or ruling appealed from and must contain tables of content and authorities, a statement of issues
presented for review, a statement of the case and facts relevant to the issues, argument and a short
conclusion that includes the relief sought.
The new rule authorizes cross-appeals in 22.30(a)(l). The old rule did not authorize
cross-appeals, so practitioners were forced at times to file preemptive Notices of Appeal which
would be withdrawn if Respondent did not appeal. This should make the appeals process fairer.
Oral argument on appeals is not always held. 22.30(d) authorizes the Environmental
Appeals Board to grant a request for, or sua sponte hold, a hearing. Interestingly, this provision
does not provide any criteria to determine the circumstances under which oral argument would be
considered appropriate. All oral arguments before the Environmental Appeals Board are held at
EPA Headquarters in Washington, D.C.
There is an EPA policy governing appearances before the Environmental Appeals Board.
The "Procedures For Coordination between OE-OGC-Regions before the Environmental Appeals
Board" guidance actually consists of several memorandums. Generally, in the case of
enforcement appeals each region designates an attorney to serve as a standing contact for receipt
of materials relating to appeals of administrative decisions. It is the responsibility of each Region
to provide notice and an opportunity to consult to EPA Headquarters (Office of Regulatory
Enforcement "ORE" and Office of General Counsel "OGC") and all of the designated regional
contacts on all adverse decisions of the ALJs and all favorable decisions that art appealed to the
EAB by respondents. Notice will be provided by faxing a copy of the decision and a brief
summary to the ORE, Regional and OGC contacts within three days of receipt of the adverse
decision. This transmission shall also notify all parties as to the time of a conference call that must
be scheduled within 4 calendar days after the fax is sent. The call is intended as an opportunity
for all interested offices to discuss the appeal issues. The purpose of this process is to ensure that
national program input and regional consistency is provided in a timely manner for all possible
appeals. The ORC attorney should provide the recommendation of the Regional Counsel or the
Deputy Regional Counsel as to whether an appeal should be taken. This recommendation should
be included in the faxed summary.
Once the decision to appeal is made, who is responsible for what is handled in one of
several ways. (1) ORE will sign the brief as co-counsel and will have written or participated in
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writing the brief; (2) ORE will appear as "of counsel" on the brief and ORE will have reviewed
the brief; or (3) ORE will not be on the brief and though ORC will have coordinated with ORE,
ORE will not necessarily review the brief. If a hearing is required, the attorney best able to
present the EPA's position should present oral argument to the EAB. The EAB has expressed a
strong preference in favor of having a single attorney present the EPA's argument. The reason
appeals require at least the notification of so many offices is that appeals, by their nature, have a
stronger likelihood of having an impact on a national level. Of course, appeals which do not have
a national impact would require minimal involvement by EPA Headquarters.
«. Final Order/Exhaustion of Administrative Remedies
A Final Order is defined as "(1) an order issued by the Environmental Appeals Board or
the Administrator after an appeal of an initial decision, accelerated decision, decision to
dismiss, or default order, disposing of a matter in controversy between the parties, or (2) an
initial decision -which becomes a final order under Section 22.27(c); or (3) a final order issued
in accordance with 22.18." Specifically, there are three ways for an Initial Decision to become a
Final Order under Part 22. An Initial Decision will automatically become the Final Order of the
Agency after the expiration of forty-five days after the initial decision is served upon the parties if
no appeal is taken. 40 CFR 22.27(c). Where an appeal is properly taken by one or both of the
parties, the EAB issues a Final Order as soon as practicable after the filing of all appellate briefs
or oral argument, whichever is later. 40 CFR 22.31 .(a). Where a case has been settled, 22.18
requires the RJO, the RA or the EAB to issue a Final Order ratifying the parties' consent
agreement.
A Final Order is the only thing in this process that constitutes final Agency action and is
the necessary pre-requisite to judicial appeals. A Respondent must have a Final Order before it
can appeal an adverse ruling to a federal district court. The legal concept known as "exhaustion
of administrative remedies" means that a Respondent must take all of the steps set forth in
Subpart F and receive a Final Order before it can appeal to a judicial forum. If the Respondent
does not exhaust his administrative remedies, the district court will dismiss an appeal as not ripe
for judicial review. EPA does not have a right to appeal an adverse ruling to a judicial forum.
This concept has been codified in 22.27(d).
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CHAPTER IV. Common Defenses/Arguments
CL Ability to Pay/Appropriateness of the Penalty
A Respondent's "ability to pay" a penalty is a common statutory factor that must be
considered when determining the appropriate penalty in a given proceeding. Whether the "ability
to pay" is a defense, and affirmative defense or part of EPA's prima facie case had been hotly
litigated for years The EAB settled the debate in its New Waterburv. Ltd., decision, TSCA
Appeal No. 93-2 (October 20, 1994). To this day, New Waterburv provides us with the EPA
position on the "ability to pay" argument. The EAB held that, in APA proceedings where the
statute at issue requires the consideration of ability to pay, Respondent's inability to pay all or
part of a penalty is neither an affirmative defense nor a defense. Rather, inability to pay is more
accurately conceptualized as a potential mitigating consideration in assessing a penalty. EPA
bears the burden of proof regarding the "appropriateness" of the penalty. "Ability to pay" is only
one of many statutory factors which must be considered in order to sustain this burden under
many of our statutes. While EPA bears a burden concerning the penalty, it does not bear a
separate burden for each of the statutory factors EPA is charged with "considering" before it
assesses a penalty. The burden applies to the overall appropriateness of the penalty. To establish
a prima facie case, EPA must go forward with some evidence that each statutory factor was
considered. A Respondent's ability to pay may be presumed until it is put at issue by a
Respondent. However, at a penalty hearing EPA must go forward with some evidence regarding
Respondent's general financial status from which it can be inferred that Respondent's ability to
pay should not affect the penalty amount. Once Respondent has presented specific evidence to
show that despite its apparent solvency it cannot pay any penalty, EPA must carry its burden of
proof by demonstrating the appropriateness of the penalty by either introducing additional
evidence to rebut Respondent's claim or through cross examination EPA must discredit
Respondent's contentions.
After New Waterburv was issued, many of the Judges issued decisions consistent with the
opinion expressed by the EAB. For example, in Bickford. Inc.. Docket No. TSCA-V-C-052-92
(October 18, 1995) Judge Vanderheyden ruled that a respondent is presumed to have the ability
to pay until it is put at issue by Respondent. If the ability to pay issue is not raised, it is deemed
waived. In James C. Lin and Lin Cubing. Inc.. FIFRA Appeal No. 94-2 (December 6, 1994) the
EAB confirmed and refined its opinion when it held that if Respondent puts its ability to pay or
continue in business at issue going into a hearing, it is EPA who must show as part of its prima
facie case that it considered the appropriateness of the proposed penalty in light of these factors.
This can be done by producing some evidence regarding the respondent's general financial status.
If the respondent cannot offer sufficient, specific evidence as to its inability to continue in business
to rebut the Region's prima facie showing, then the ALJ may conclude that the penalty is
appropriate. EPA carries the burden of persuasion on this issue, but where Respondent fails to
rebut EPA's prima facie case, EPA has satisfied its burden.
Judges continue to refine exactly what must be presented and when. In Century Products,
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Inc.et seq. Docket No. IF&R-IV-94F007-C (January 24,1996) Judge Nissen ruled that, although
Respondent's ability to pay may be presumed early in the proceeding, EPA must attempt to obtain
and consider business information prior to a hearing or final penalty calculation. In a February 18,
1997 ruling in the same case, Judge Nissen held that in the absence of more specific data, EPA
may use general business information and other secondary sources to assess the size of a
respondent's business and the impact of a proposed penalty on the firm's ability to continue in
business. The Judge cites newspaper articles on Respondent's business and previously submitted
sales and production data as acceptable forms of information. In Gordon Head and William
Spander. Docket No. TSCA-V-C-057-93 (February 8, 1996) Judge Charneski ruled that where
Respondent puts ability to pay at issue, EPA must be given access to the Respondent's financial
records before the start of the hearing.
Another common statutory penalty criteria which must be considered is the Respondent's
"compliance history" or "history of prior violations" or the "Respondent's history of
noncompliance". Some may have believed that these criteria are really the same. However, the
ALJ's have interpreted them quite differently. In Ocean State Asbestos. CAA Appeal Nos. 97-2
and 97-5 (March 13, 1998) the EAB ruled that the term "compliance history" (contained in the
CAA) is broader than the phrase "prior violation" and encompasses more than instances where
there was an opportunity to contest the violation. In Indspec Chemical Corporation and
Associated Thermal Services. Inc.. Docket No. CAA-JJI-086 (January 26,1999) Judge Moran
would not consider evidence of other violations where the "compliance history" was being
considered because (1) they occurred subsequent to the subject violations and compliance history
does not contemplate future events; (2) EPA never notified Respondent of the other violation, as
required by the EAB's Ocean State decision; (3) the state matter was a different type of CAA
violation. Judge Moran issued a "dissenting opinion" to the Ocean State EAB decision but
recognized that he is bound by their holding.
b. Bankruptcy
Occasionally, a Respondent will argue that rt has filed for either Chapter 7 liquidation or
Chapter 11 reorganization and, therefore, should not be held liable or is not able to pay a penalty.
It is important that EPA's administrative practitioners have some familiarity with the Bankruptcy
Code in the event this argument is presented. Bankruptcy is not a defense to liability, but it may
be a legitimate penalty mitigation factor.
Take a look at these cases with important holdings involving bankruptcy issues. In Anglo
Iron & Metal Company. Docket No. TSCA-VI-625C (June 11, 1997) Judge Bullock ruled that a
motion to stay the proceedings would be denied despite the Respondent's bankruptcy petition.
Citing Sectibil 362, the Judge held that a proceeding seeking entry of, judgment in an
administrative penalty proceeding is within EPA's authority to enforce environmental laws and is
not stayed by Respondent'siiling of a bankruptcy petition. It is the enforcement of any penalty
assessment resulting from a proceeding which is a money judgment that is subject to the stay
provisions of the bankruptcy code. Judge McGuire agrees in Automotive Finishes. Inc..
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Docket No. 5-EPCRA-96-013 (February 11, 1997) where he held that the bankruptcy code does
not authorize an automatic stay when EPA is suing to prevent or stop violation of environmental
law or seeking to secure the entry of a money judgment for such violation. Of course any effort
to enforce a penalty assessment would be subject to the stay provisions of the bankruptcy code.
Similarly, in Testa Excavating Co. And Thomas O'Brien, Docket No. CAA-I-92-1061 (March 28,
1995) Judge Nissen ruled that Respondent's involvement in a state receivership process did not
constitute a good cause for its failure to file prehearing exchange.
c. Constitutional Defenses
There have been a wide variety of constitutional defenses raised by Respondents. Some
argue that the administrative process itself violates their right to due process. Some argue that
EPA's conduct has violated Respondent's due process rights. Respondent's have raised the Fifth
Amendment, the Tenth Amendment and the Seventh Amendment, to name a few. While most
Judges agree that they do not have the authority to rule on the constitutionality of statutes or
particular statutory provisions or regulations, they are divided on other constitutional issues.
In Gordon Head and William Spander. Docket No. TSCA-V-C-057-93 (July 15,1994)
Judge Lotis rejected Respondents argument that its rights under the Fifth Amendment had been
violated because the same violation had resulted in state and federal actions. The Judge ruled that
since they are separate sovereigns, both the federal government and the state may independently
prosecute Respondents under their respective laws. In Kalamazoo Regional Psychiatric Hospital
and the Michigan Department of Mental Health. Docket No. CAA-020-92 (April 26,1995) Judge
Greene held that an ALJ does not have jurisdiction to decide constitutional questions and,
therefore, rejected Respondent's Tenth Amendment argument. Note that other Judges have held
that authority does exists to rule on some issues of constitutionality. In Northern Improvement
Company. Docket No. CAA-VTJI-(113)-93-10 (October 13, 1995) Judge Nissen ruled that it is
well settled that challenges to the validity of Agency regulations are rarely entertained in
administrative enforcement proceedings. In Ro-Banks Tool & Manufacturing Company. Docket
No. CWA-VJJI-95-04-Pn (September 10, 1996) Judge Kuhlman ruled that an ALJ may not
entertain a defense based on the argument that the statutory section under which the complaint
has been made is unconstitutional. Further, Congress is constitutionally permitted to legislate that
penalty complaints be resolved in an administrative proceeding where jury trials are not available.
Finally, in Condor Land Company. Docket No. CWA-404-95-106 (December 5,1996) Judge
Charneski ruled that the Seventh Amendment right to a jury trial does not extend to administrative
proceedings. In Woodcrest Manufacturing. Inc.. EPCRA Appeal No. 97-2 (July 23,1998) the
EAB rejected Respondent's argument that the penalty violates the excessive fines provision of the
Eighth Amendment since Respondent failed to establish that the penalty was grossly
disproportionate to the violation at issue.
Another type of constitutional defense is where the Respondent attacks the validity of the
rule at issue in the case. In United States Department of the Navy. Kingsville Naval Air Station,
TSCA Docket No. VI-736C(L) (February 24,1999) Judge McGuire held that a Respondent' may
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not challenge the validity of a regulation on its face in the context of an administrative proceeding
and rejected the argument that the rule exceeded the scope of EPA's rule-making authority (a
Respondent's opportunity to challenge a rule is during the public comment period when the rule is
being promulgated). Judge Gunning agrees in United States Air Force, Tinker Air Force Base.
Docket No UST-6-98-002-AO-1 (May 19,1999) and ruled that whether or not a provision of a
statute or regulation is constitutional cannot be entertained, however, the constitutional
application of the law to a particular set effects can be addressed.
d. Deference to Agency Regulatory Interpretations
Deference to Agency Interpretation is not generally a defense raised by Respondents. It is
an argument raised by EPA in an effort to convince a Judge that he or she should give great
weight to a particular piece of evidence - namely, an agency position as expressed in a preamble,
policy, etc. EPA has been successful when the "interpretation" is one that clearly comes from the
"agency". That means that it is a formally promulgated position or has other indicia of approval
by EPA management and is not merely the latest position of EPA counsel. For example, in
General Motors Corp.. General Motors Technical Center. Docket No. RUST-002-93 (January
19, 1995) Judge Vanderheyden rejected EPA's "Chevron"-based argument that deference must be
given to an agencies interpretation of its own regulations. The Judge held that the rule of
deference is owed to the agency's interpretation and not the interpretation of enforcement
counsel. Agency litigating positions are not entitled to deference. However, in CWM Chemical
Services. Inc et sea.. TSCA Appeal No. 93-1 (May 15,1995) the EAB held that although an
agency is permitted to develop an interpretation of validly promulgated rules for the first time in
an adjudication, the application of the interpretation must comport with due process, particularly
where the agency is seeking penalties for a violation of the interpretation.
e. Estoppel, Res Judtcata, Laches, etc.
There are many examples of Respondent's who have tried to raise the affirmative defenses
of estoppel, res judicata and/or laches. While these arguments have rarely succeeded, they should
not be ignored. There are circumstances under which they could succeed, therefore a good
practitioner will examine the evidence in each case to'determine the legitimacy of the argument
before filing a Motion to Strike or otherwise responding to the defense.
In Kalama?oo Regional Psychiatric Hospital and the Michigan Department of Mental
Health. Docket No. CAA-020-92 (April 26,1995) Judge Green ruled that estoppel against the
government is permitted, if ever, only in extraordinary circumstances and only when affirmative
misconduct is proved^ In Britton Consttuctibn. Docket No. CWA-JJI-096 (May 21, 1997) Judge
Pearlstein ruled that a claim of bittoppel against the federal government requires a showing that
the claimant relied to, te detriment on dh affirmative misrepresentirtidn or misconduct by the other
party and that the egregious misconduct was at the poticy-riiaking level. In BJ Carney Industries.
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Inc.. Docket No. 1090-09-13-309(g) (March 11, 1996) Judge Head ruled that equitable estoppel
is rarely available against the federal government acting in its sovereign capacity. An estoppel
analysis requires Respondent to show that it reasonably relied on EPA's action or failure to act,
that it suffered a detriment adequate to sustain a claim of estoppel against the government and
EPA's conduct constituted affirmative misconduct. In Borough of Naugatuck. Connecticut.
Docket No. CWA 2-1-97-1017 Judge Pearlstein held that acquiescence, indifference or inaction
falls far short of the affirmative misconduct required to apply equitable estoppel against the
government. Although Judge McGuire denied a motion to strike the estoppel defense in Troy
Chemical Corp.. Docket No. E-TSCA-8(A)-98-0101 (October 14,1999) when EPA argued that
TSCA is a strict liability statute and held that "strict liability" simply means that a showing of
intent is not required and does not eliminate equitable estoppel as a defense.
In Harmon Electronics. Inc.. RCRA (3008) Appeal No. 94-4 (March 24, 1997) the EAB
held that EPA's complaint was not barred by the doctrine of res judicata in this RCRA overfiling
case since EPA was not a party to the State action nor was it in privity with the State. In 1998
the U.S. District Court for the Western District of Missouri overturned this final order of EPA
and held that RCRA, its legislative history and the common law principle of res judicata preclude
EPA from enforcement in this case. See Harmon Industries v EPA. 19 F.Supp. 2d 988 (August
25, 1998). The Court of Appeals for the Eighth Circuit affirmed the District Court's decision.
See, Harmon 191 F.3d 894 (September 16, 1999). EPA's Petition for Rehearing En Bane was
denied on January 24, 2000. See also, Bil-Drv Corporation. Docket No. RCRA-JJI-264 (October
8, 1998) where Judge McGuire flatly rejects the decision of the district court in the Harmon case.
Some Respondent's have tried to argue that EPA engaged in illegal selective enforcement.
In B & R Oil Company. Inc.. RCRA (3008) Appeal No. 97-3 (November 18, 1998) the EAB
rejected Respondent's affirmative defense of illegal selective enforcement and held that requisite
showing requires proof that (1) the government singled out a violator while other similarly
situated violators were left untouched, and (2) the selection was in bad faith based on such
impermissible considerations as race, religion, or the desire to the prevent the exercise of a
constitutional right. In TUFA. Ltd.. IF&R Docket No. H-547-C (October 19,1998) Judge Biro
would not allow a Respondent to amend its Answer to include the claim of selective enforcement
because it failed to make a threshold showing that (1) Respondent was part of a protected group,
(2) Respondent was prosecuted; (3) others in a similar situation not members of the protected
group would not be prosecuted and (4) the prosecution was initiated with discriminatory intent.
/ "/ didn 't know" or "It was such a small violations"
Once in a while a Respondent argues as a defense or merely as a mitigation factor that the
violation was "so small", "only paperwork", or "no environmental harm was done". The Judges
have uniformly rejected this argument as a defense, although several judges will consider this
argument when calculating a penalty since it goes to the nature of the violation. In Green
Thumb Nursery. Inc.. Docket No. JJF&R-V-014-94 (August 31, 1995) Judge Vanderheyden ruled
that characterizing a violation as a "small technical paperwork infraction" was a shortsighted view
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of the potential harm from failing to register a pesticide. Such a failure deprives EPA of necessary
information and, thus, weakens the statutory scheme. Further, where a Respondent elects to
engage in a regulated business it is its duty to be aware of the regulatio ns applicable to its
business. In PIC Americas. TSCA Appeal 94-2 (September 27,1995) the EAB rejected
Respondent's argument that the case involved mere "paperwork" violations and held that failure
to file TSCA inventory update reports was serious because it impairs the ability of EPA to carry
out its statutory risk assessment responsibilities. In Steven Turtle. Turtle Tool Engineering and
Tuttle Apiary Laboratories. Docket No. FIFRA 10-96-0012 (September 30, 1997) Judge
McGuire rejected Respondents defense that he did not register his pesticide because it posed no
threat to the environment. The Judge ruled that such a determination is one to be made by EPA
through rulemaking after an application for an exemption is filed and not on an ad hoc basis by
manufacturers. In Oklahoma Metal Processing Company. TSCA Docket No. VI-659C (October
7, 1997) Judge Kuhlman rejected Respondent's plea to lower the penalty because no
environmental harm was caused and held that the "mere fact that no harm may have occurred is
not a reason to lower the penalty where chance and not respondent's actions are responsible for
such an outcome." In Butin Urethane Corporation. Docket No. EPCRA 09-97-009 (September
16,1998) Judge Charneski rejected Respondent's argument that there should be a minimal
penalty because EPA did not use the information required to be submitted under EPCRA and held
that how EPA chooses to distribute information collected under EPCRA is irrelevant to liability
and penalty.
Whether a Respondent knew of a regulation is a trickier issue. Generally, Respondents
are charged with knowing the regulations and law applicable to the industry in which they
operate. In Green Thumb Nursery. Inc.. Docket No. JJF&R-V-014-94 (August 31, 1995) Judge
Vanderheyden ruled that where a Respondent elects to engage in a regulated business it is its duty
to be aware of the regulations applicable to its business. In TRA Industries, Docket No. EPCRA
1093-11-05-325 (February 5, 1996) Judge Charneski ruled that Respondent could not avoid
liability by claiming ignorance of the statutory obligation or by assessing blame on its suppliers for
allegedly not providing it with the necessary information needed to comply with the law. In
Pawns Plus. Docket No. CAA-09-96-05 (October 9,1997) Judge Gunning rejected Respondent's
argument that it had no actual notice of the law and held that Respondent is charged with
constructive notice of the law and that due process does not require actual notice.
There can come a point, however, where a Respondent's lack of knowledge is justifiable
and will amount to a complete defense. This scenario is called a "fair notice" defense. It is raised
when the regulations at issue are vague and the Respondent was justified in thinking that the
regulatory obligation did not apply. For example, in Cytec Industries. Inc.. Docket No. V-W-
009-94 (December 23,1997) Judge Pearlstein rejected Respondent's "fair notice" defense and
held that while the regulation at issue was not a "paragon of clarity" EPA's interpretation is
reasonably ascertainable and, therefore Respondent is charged with knowing that the regulation
applied. There are many ALJ and judicial decisions on the "fair notice' issue. See, E.I. DuPont
de Nemours & Co.. Docket No. FTFRA-95-H-02 (April 30, 1998); EAB Decisions in Everwood
: (September 27,1996), Green Thumb Nursery (March 6,1997), Harmon Electronics
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(March 24, 1997).
g. Statute of Limitations/Continuing Violations
28 U.S. C. Section 2462 provides that, "Except as otherwise provided by Act of Congress,
an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary
or otherwise, shall not be entertained unless commenced within five years from the date when the
claim first accrued. . ." In the case of 3M Company v. Browner. No. 92-1126 (D.C. Cir. Mar. 4,
1994), the Court of Appeals for the D.C. Circuit held that the federal statute of limitations
contained in 28 U.S.C. Section 2462 applied to administrative penalty actions under TSCA
Section 16(a)(2)(A) and that the penalty claim accrued when the violations were committed. A
request for certiorari in this case was denied. The holding in 3M applies to penalty actions under
all statutes because the Circuit Court was interpretating 28 U.S.C.2462 and not simply TSCA.
This decision is binding precedent in administrative enforcement actions and in judicial penalty
actions before the D.C. Circuit Court. Outside the D.C. Circuit, 3M is not binding but is one of
several cases addressing the issue of when a claim accrues for purposes of 28 U.S.C. Section
2462.
EPA Headquarters has prepared two guidance documents that practitioners should read as
they contain valuable information. It should be noted, however, that neither document were ever
issued in final. The draft guidance documents are:
(1) Guidance on the Application of the Federal Five-Year Statute of Limitations to
Administrative and Judicial Civil Penalty Proceedings, drafted June 7,1994 by Robert Van
Heuvelen, Director of Regulatory Enforcement, OECA..
(2) Assessment of Civil Penalties for Continuing Violations, drafted June 10,1994 by
Robert Van Heuvelen, Director of Regulatory Enforcement, OECA..
There have been several administrative decisions issued by EPA's ALJs since the landmark
3M decision which address the question of statute of limitations and continuing violations. They
include.
* Harmon Electronics. Docket No. RCRA-VII-91-H-0037. On December 12, 1994
Judge Vanderheyden held that where the violations are for treating, storing and disposing of
hazardous waste without a permit a separate claim accrues and a new period beguis each day the
violations continue until the appropriate clean-up measures are erected or remediation occurs. On
March 24, 1997 the EAB issued a Final Order and held that all the violations in this case were
continuing in nature and, therefore, the illegal conduct continued into the limitations period.
* 3M Company. TSCA Appeal No. 90-3. On March 22,1995, on remand following the
March 4,1994 Order of the U.S. Court of Appeals for the District of Columbia which held that
the general five year statute of limitations in 28 U.S.C. Section 2462 applied to this TSCA PMN
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matter, the EAB dropped all penalties associated with violations committed more than five years
before EPA commenced its proceeding.
* Lazarus, inc.. Docket No. TSCA-V-C-32-93. Pending appeal. On May 25, 1995 Judge
Harwood held that PCB fire department registration claims and unlawful storage violations are
not time barred but, rather, they continue into the limitations period. However, the Judge found
that Section 2462 barred claims for failure to inspect PCB transformers quarterly and keep
records of such inspections where such violations first occurred more than five years prior to the
filing of the complaint.
* CWM Chemical Services. Inc. et sea.. Docket No. JJ-TSCA-PCB-91-0213. On July
26, 1995 Judge Lotis dismissed this PCB matter ruling that the violations were all barred by the
five year statute of limitations.
* Harold G. Rueth/Rueth Development Company. Docket No CWA-A-007-92. On
August 20,1996 the ALJ ruled that, based on CWA Section 301, each day pollutants remain in a
wetland constitutes another violation of the Act for purposes of calculating the statute of
limitations.
* Garrison-Jones Architects. Inc.. Docket No. TSCA-V-C-96-015. On March 11,1997
the Judge ruled that under TSCA and AHERA it is possible to have continuing violations but
found the record insufficient to rule on whether the violation was a single act or continuing.
* Standard Foreings Corp. and Trinity Industries. Inc.. Docket No. TSCA-V-C-080-92.
On March 21, 1997 the Judge ruled that Respondent's TSCA PCB violation for failing to register
PCB transformers with the fire department continues until such time as the transformers are
properly registered.
* Harmon Electronics. Inc.. RCRA (3008) Appeal No. 94-4. On March 24,1997 the
EAB ruled that the complaint, charging Respondent with operating a hazardous waste landfill
without a permit or interim status, failing to have a groundwater monitoring program, failing to
establish and maintain the required financial assurances and liability coverage and failing to notify
and/or register as a hazardous waste generator in violation of RCRA, was not barred by the
statute of limitations and held that all of the violations were continuing in nature and, therefore,
the illegal conduct continued into the limitations period.
* J. V. Peters and Company. David R Shillman and Dorothy L. Brueggemever. Docket
No. RCRA (3008) Appeal No. 95-2 (April 14,1997). Respondent raised the issue of the statute
of limitations during a remand to the EAB from the U.S. District Court. The EAB held that
where a District Court Judge had already ruled that a complaint was not barred by the statute of
limitations such ruling is the law of the case and precluded further review of the issue by the EAB.
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* Britton Construction. Docket No. CWA-ffl-096. On May 21, 1997 Judge Pearlstein
ruled that violations of CWA Sections 301 (a) and 404 constituted continuing violations while the
illegal discharged fill remains in the wetland.
* Steeltech Ltd.. Docket No. EPCRA-037-94 (December 3,1997) Judge Biro, citing
Lazarus. Inc.. TSCA Appeal No. 95-2 (September 30, 1997), ruled that the requirement under
TSCA to prepare and maintain PCB annual documents was not continuing in nature and EPA
could not collect penalties for failure to prepare such documents in the years preceding the five-
year statute of limitations period.
* Rhone-Poulenc Basic Chemicals Division, Docket No. 5-EPCRA-07-053 (April 27,
1998) Judge McGuire held that EPCRA Section 313 violations are not continuing in nature and,
therefore, are barred by the statute of limitations. The obligation to file a Form R is particular to
the year it is due. The Judge conducted thorough analysis using a two-prong test set forth by the
Supreme Court in Toussie v United States. 397 U.S. 112 (1970).
* In Auto Alliance International. Inc.. Docket No. 5-EPCRA-98-023 (May 13,1999)
Judge Moran held that, for the purpose of analyzing the statute of limitations, a complaint is
"issued" when it is filed with the Regional Hearing Clerk.
h. Paperwork Reduction Act
The Paperwork Reduction Act (PRA) generally requires that identical "information
collection requests" (ICRs) by federal agencies to ten or more persons be approved by the Office
of Management and Budget (OMB) and, once approved, display a currently valid OMB control
number. Where an information collection request subject to the Act does not display a current
control number or, where appropriate, does not state that such request is not subject to the PRA,
then "no person shall be subject to any penatly for Ming to maintain or provide information to
the requesting agency". 44 U.S.C. Section 3512. The PRA does contain limited exemptions
including, but not limited to, those for information collected during the conduct of federal criminal
investigations or prosecutions, and federal civil judicial or administrative actions. 44 U.S.C.
Section 35lS(c)(l)(A) & (B).
In 1993 EPA became aware that there were lapses in the OMB authorization of ICRs
associated with some of its regulations. EPA also found that, in some cases, it failed to display a
current control number. These ICR deficiencies prevent EPA from collecting penalties for failure
to report or maintain a record as required by a regulation subject to a deficient ICR. Many issues
have come up in the context of civil and administrative cases addressing EPA's PRA issue. Some
of the more common holdings are as follows:
1) A defense based on the PRA is an affirmative defense which must be timely pled or it is
deemed waived.
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2) EPA satisfied the "display" requirement of the PRA through publication of applicable
ICR numbers in the Federal Register, despite failing to ensure such numbers were also included in
the Code of Federal Regulations.
3) The PRA applies only to ICRs made by Federal agencies and is inapplicable to
information requirements imposed by state law.
4) The PRA does not apply to Agency regulations mandating disclosure by regulated
entities to third parties.
5) The public protection provision of the PRA does not serve as a defense to enforcement
actions premised on statutorily-based requirements.
6) The PRA does not apply to regulatory provisions that are not a means of acquiring
information for use by Agency personnel, but are "substantive regulatory choices" used to
accomplish the Agency's substantive statutory mission.
7) The PRA precludes the imposition of penalties, but does not preclude a finding of
liability or, in appropriate circumstances, the issuance of injunctive relief.
8) The PRA does not apply to the collection of information undertaken as part of an
administrative enforcement action or investigation of a specific person or entity.
The cases which support these holdings include the following:
* Cvtec Industries. Inc.. Docket No. V-W-009-94. On July 31, 1996 Judge Charneski
ruled that RCRA monitoring requirements are not ICRs and, therefore, not subject to the PRA.
However, the Judge also dismissed several counts for non-compliance with the PRA and held that
the display of an incorrect control number, in both the CFR and FR, cannot be considered a
"currently valid" display that satisfies the requirements of the PRA.
* Ketchikan Pulp Company. Docket No. CWA-1089-12-22-309(g). On November 22,
1995 Judge Head held that no penalty could be assessed for failure to notify EPA of a sludge
discharge because the CWA permit at issue lacked a current control number or disclaimer as
required by the PRA.
* Rhone-Poulence AG Company. Docket No. FIFRA-95-H-01. On November 15, 1996
Judge Nissen ruled that Worker Protection Statements on pesticide labels were not information
requests under the PRA because the PRA does not apply to disclosure of information to third
parties.
* Tower Central. Inc.. Docket No. CAA-m-030. On July 28,1994 Judge Head
dismissed a count in this CAA case because the information request form foiled to display the
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current OMB control number and therefore, no penalty could be assessed.
* SCA Chemical Services & CWM Chemical Services. Docket Nos. II-TSCA-PCB-88-
0205 & 0204. On September 7, 1994 Judge Lotis held that a complaint charging Respondent
with failing to conduct appropriate testing under the PCB is not barred by the PRA, despite the
fact that the PCB Disposal Approval did not contain an OMB control number. On October 19,
1994 this issue was certified for interlocutory appeal.
* Mobav Corp.. Dockeet No. TSCA-m-605. On March 1,1995 Judge Harwood ruled
that information required to be submitted by statute is not subject to the PRA and that, in any
event, noncompliance with the PRA does not confer a right to import a new chemical without
giving notification as required by TSCA.
* TRW Inc.. Docket No. TSCA-V-C-33-891. On April 20, 1995 Judge Head ruled that
an information collection request contained in a PCB Disposal Approval to monitor groundwater
at its chemical waste landfill should have had an OMB control number or the appropriate
disclaimer. It was considered insufficient that the regulation contained the valid OMB number, it
should have also appeared on the Approval.
* Lackland Training Annex. Docket No. RCRA VI-311-H. On May 12,1995 Judge
Nissen ruled that if a violation was statutory, not regulatory, the PRA does not bar enforcement.
If a violation is both statutory and regulatory, a penalty for the statutory violation is not barred
simply because a penalty for violation of the regulation is precluded by the PRA.
* Bickford. Inc.. Docket No. TSCA-V-C-052-92. On October 18, 1995 Judge
Vanderheyden dismissed counts alleging the failure to develop and maintain annual records on the
disposition of PCBs since an OMB control number did not appear in the text of the regulation in
the Federal Register at the pertinent time as required by the PRA. Further, Respondent's failure
to raise the PRA as an affirmative defense did not constitute a waiver since a waiver is not
allowed where it "would not be in the interests of justice".
* Cvtec Industries. Inc.. Docket No. V-W-009-94. On July 31,1996 Judge Pearlstein
ruled that the PRA defense can be raised at any time during the administrative proceeding.
Further, the PRA defense is not waived when it is the ALJ who raises the issue, sua sponte, in his
order.
* Rhone-Poulenc AG Company. Docket No. FIFRA-95-H-01. On November 15, 1996
Judge Nissen ruled that worker protection statements on the labels of pesticides are not
information requests under the PRA.
* El DuPont de Nemours. Docket No. FEFRA 95-H-02. On March 6, 1997 Judge
Kuhlman rejected Respondent's PRA argument and ruled that there is no requirement in the PRA,
APA or FIFRA for EPA to establish in an enforcement action that the steps it took in
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promulgating a rule and/or policies governing the rule were procedurally correct. In dismissing
Respondent's PRA argument the Judge was persuaded by the fact that Respondent failed to raise
the PRA issue in its Answer or at any time prior to the subject Motion to Dismiss. Further, after
reviewing the EPA's PRA history with respect to the FIFRA Worker Protection Standards, the
Judge ruled that there was no ICR lapse in OMB approval.
* EK Associates. L.P. d/b/a EKCO/daco and EK Management Corp.. CAA Appeal No.
98-4. On June 22, 1999, the EAB held that a display in the form of a table (40 CFR Part 9) is
consistent with the requirements of the PRA and is practiced by other administrative agencies.
* Auto Alliance International. Inc. Docket No. 5-EPCRA-98-023. On September 16,
1999 Judge Moran held that the PRA is inapplicable to information required explicitly by statute.
Also, EPCRA record-keeping requirements are implicitly included in the requirement of Form R
reporting and, therefore, are covered by the Form R OMB control number and was adequately
displayed.
i EPA Policies as Defenses to Liability and to Mitigate Penalty
Respondent's have tried to use EPA's policies as a defense to liability and as argument to
mitigate a penalty. With respect to penalty issues, Respondent's have tried to use EPA policies
which are clearly designated as applicable only during settlement in an effort to take advantage of
the softer EPA settlement positions. ALJ's have, generally, rejected this attempt by Respondents.
For example, the Judge in Tower Central. Inc.. Docket No. CAA-ffl-030 (April 14,1997) rejected
Respondents attempt to use EPA's Small Business Policy in arguing to mitigate the penalty.
Judge Moran agreed in Tebay Dairy Company. Docket No. EPCRA-JJI-236 (September 30,
1999) when he granted EPA's Motion to exclude as immaterial exhibits discussing the Small
Business Policy. However, beware of Judge Nissen's decision in Haveman Grain Company and
DanHaveman. Docket No. IF&R-VU-1211C-93P (July 7, 1995) where, in a footnote, he
concluded that the matter should be settled in light of the President's Memorandum Regulatory
Reform-Waiver of Penalties and Reduction of Reports, 60 Fed. Reg. 20621 (April 26,1995) and
EPA's Interim Policy on Complaince Incentives for Small Businesses, 60 Fed. Reg. 32675 (June
23,1995). The Judge makes the same footnoted recommendation in Harley Brown. Docket No.
RCRA-UST-Vm-90-02.
Respondents, and Judges, have made similar attempts with other EPA enforcement
policies that are intended only for settlement purposes. In Hiarmon Electronics. RCRA (3008)
Appeal No. 94-4 (March 24, 1997) the EAB rejected Respondent's argument that the Audit
Policy should be used to eliminate the gravity component of the penalty and held that EPA's self-
reporting policy is intended as a guidance in the settlement context and is not intended for use in
the adjudicatory context. However, the EAB had trouble in the Bollman Hat Company. EPCRA
Appeal No. 98-4 (February 11, 1999) case because it was EPA that introduced the Audit Policy
into evidence! In Bollman the EAB held that it was not error for the Judge to have used the
Audit Policy to lower the penalty because EPA introduced it, despite the fact that the policy is
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intended solely for settlement. Instead the EAB discarded the ALJ's penalty rationale, substituted
their own and assessed the same penalty. In Spang & Company, EPCRA Appeal Nos. 94-3 and
94-4 (October 20, 1995) the EAB ruled that SEPs are legally enforceable commitments to
perform an environmentally beneficial project in the future (created by the SEP Policy) which is in
exchange for settlement of the case, and, therefore, rejected Judge Nissens decision to use SEPs
in a contested penalty hearing.
In arguing to mitigate a penalty, Respondents will sometimes attack the penalty policy
itself as being arbitrary and capricious and, therefore, should not be used to calculate the penalty.
Sometimes this argument works and sometimes it doesn't. This most important thing to
understand when arguing a penalty amount is that the ALJs are not required to assess a penalty
in accordance with an EPA ERP\ Part 22 merely requires that the ALJs "considered any civil
penalty guidelines issued under the Act" and "set forth in the initial decision the specific reasons
for [any] increase or decrease" if the ALJ chooses to assess a penalty different in amount from
that proposed in the complaint. This is very important! In 1994 the Court of appeals set aside a
penalty in a case involving the FCC and held that a "penalty schedule" had been applied so
inflexibly as to amount to a rule, and therefore needed to be duly promulgated in order to be used.
U.S. Telephone Association v FCC. 28 F.3d. 1232 (D.C. Cir, July 12,1994). InEmplolvers
Insurance of WAUSAU and Group Eight Technology. Inc.. TSCA Appeal No. 95-6 (February
11, 1997) the EAB held that there was no basis to conclude that EPA decision makers, like those
in the FCC case, applied ERPs so inflexibly as to be tantamount to applying a rule. Using a
written policy to assist in penalty decision making provides fairness in enforcement as it ensures
that penalty proposals are developed in a regular and consistent manner.
Remember that the ERPs are merely tools to use in presenting a proposed penalty. At
hearing, EPA will be required to show that the proposed penalty is consistent with the applicable
statutory factors which are required to be considered in assessing penalties. In Skarda Flying
Service. Docket No. FIFRA VI-672C (October 17, 1996) Judge Pearlstein ruled that the FIFRA
ERP failed to consider the statutory factors listed in FIFRA Section (a)(4) and reduced the
penalty as a result of the ERP's inconsistency with the statute. In Ocean State Asbestos Removal.
Docket No. CAA-I-93-1054 (January 24, 1997) Judge Pearlstein rejected the "second violation"
rule contained in the CAA ERP which authorizes an increased penalty based upon a previous
Unilateral Compliance Order. The Judge found this practice to be contrary to CAA Section 113
which requires an opportunity for a hearing before a penalty can be assessed. On appeal the EAB
reversed Judge Pearlstein on this point and held that "compliance history" is broader than the
phrase "prior violation" and encompasses more than instances where there was an opportunity to
contest the violation. Ocean State Asbestos. CAA Appeal Nos. 97-2 and 97-5 (March 13,1998).
In Hall Signs. Inc.. EPCRA Appeal No. 97-6 (December 16,1998) the EAB held that ALJs do
not have authority to "strike down" EPA policy per se, however an ALJ can hold that a particular
policy is inapplicable in a given case.
The EAB has also upheld an ALJ who chose not to assess a penalty at all, but instead
chose to issue a notice of warning. In Predex Corporation. FIFRA Appeal No. 97-8 (May 8,
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1998) the EAB held that when the presiding officer assessed a penalty that falls within the range
of penalties provided in the penalty guidelines, the Board will not substitute its judgment for that
of the presiding officer absent a showing that the presiding officer has committed an abuse of
discretion or a clear error in assessing the penalty.
Sometimes the ALJs actually support our policies. In Umpqua Research Company.
Docket No. 10-94-0228-FIFRA (May 15, 1997) Respondent had argued that the FIFRA ERP
was unfair in the way it categorized a company's "size of business". The Judge rejected
Respondent's argument and held that it had failed to show that EPA's segregating businesses into
three groups, according to gross revenue, is arbitrary, capricious, or an otherwise invalid method
for considering one of the statutory penalty criteria.
Occasionally, a Respondent tries to use an EPA policy as a defense to liability. In V-l Oil
Company. Docket No. 10-94-0251-RCRA (January 29, 1999) Judge Charneski rejected the
Respondent's defense that it complied with an EPA Underground Storage Tank guidance
document and held that compliance with a general guidance document is not the equivalent of
compliance with a duly promulgated, unambiguous regulation. In AUeghencv Power Service
Corporation and Choice Insulation. Inc. Docket No. CAA-IH-0676 (December 14, 1999) Judge
Bullock rejected a Respondent's attack on an EPA inspector's testimony when it was alleged that
the inspector did not use an advisory guidance document in conducting sampling. The Judge
ruled that the inspectors choice not to use an advisory EPA guidance document on how to sample
asbestos does not mean that the evidence he gathered should be disregarded.
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CHAPTER V. Statutes with Impact
a. Equal Access to Justice Act (EAJA)
Congress passed the Equal Access to Justice Act in 1980 in an attempt to rectify the
common situation in which persons were deterred from seeking review of, or defending against,
unreasonable governmental action because of the expense involved in securing the vindication of
their rights. The Act came as a direct result of Congressional response to the decision in Alyeska
Pipeline Service Co. v. Wilderness Society. 421 U.S. 240 (1977), which precluded fee liability
against the federal government in the absence of a specific statutory authorization. It is in part
grounded on the congressional perception that governmental actors are inadequately deterred
from misconduct despite an intricate web of political checks, including judicial review. Now,
some 17 years since its enactment, history shows that environmental litigation is especially suited
to the EAJA because costs of such litigation are often extremely high while the resources of the
respondents are frequently low.
The heart of EAJA and the focus of most litigation concerning the statute is the provision
for the mandatory award of attorney's fees unless the "position of the United States was
substantially justified". The wording of the statute suggests that two factors must be carefully
examines when arguing or deciding an EAJA case. The first factor to be considered is the nature
of the "position of the United States". The second factor concerns the meaning of the phrase
"substantial justification".
The original EAJA did not define "position", nor did the legislative history discuss it. As
such, the interpretation of this term was left to the courts and two differing definitions quickly
developed. The first approach defines the government's position as consistiing of only the
agency's litigation position. This "litigation position only" theory gained early acceptance in
several courts. However, a second approach was developed that supported the idea that the
language in the Act indicated a broader interpretation. The "underlying action" theory proposed
that in an EAJA claim a court should consider both the record of the agency's actions that led to
the dispute and the position argued by the agency before the court. It is this second position that
has been adopted by most courts. But this expansive reading of "position" is tempered by a
determination that whether the government's position is "substantially justified" must be made "on
the basis of the record which is made in he civil action for which fees and other expenses are
sought". Pub. L. No. 99-80, Section 2(b), 99 Stat. At 184-85 (codified at 28 U.S.C. Section
2412(d)(lXB)(1988)).
In Pierce v Underwood. 989 F.2d 123 (3d Cir. 1993), the Supreme Court established the
general definition of "substantially justified" as meaning that the government's position, both in its
underlying conduct and in its litigation posture, must have a "reasonable basis in both law and
fact". The phrasing of the statute further suggests that "substantial justification" is in the nature
of an affirmative defense upon which the government bears the burden of proof Like the
interpretation of "position", the "substantial justification" inquiry must address both the
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governmental action that precipitated the lawsuit and the posture assumed by the government in
the litigation. It is important to note that in most instances the focus of the "substantial
justification" inquiry will be upon the pre-litigation position of the government, because a
reasonable litigation defense made in court will not save the government from liability for EAJA
fees if its underlying conduct was unjustified. In Marcus v. Shalala. 17 F.3d 1033 (7th Cir. 1994)
the court ruled that the fact that the government's litigating position was substantially justified
does not necessarily offset prelitigation conduct that was without a reasonable basis. But there
are also instances when the underlying government position is substantially justified, but
government misconduct arises during the course of the litigation and results in a finding of lack of
substantial justification upon an evaluation of the case as a whole. In sum, the government must
be reasonable before and after litigation proceeds.
The primary case dealing with the meaning of "substantial justification" is Commissioner
v. Jean. 496 U.S. 154 (1990). This case stands for the proposition that a single decision as to
substantial justification governs eligibility for fees for the entire action. This does not mean "that
every argument made by the government must be substantially justified". Rather the court must
evaluate "every significant argument made by the government to determine if the argument is
substantially justified, and then conclude whether, as a whole, the government's position was
substantially justified. Jean directs a "more broadly focused analysis that would reject the view
that any unreasonable position taken by the government automatically opens the door to an EAJA
award". Roanoke River Basin Assoc. v. Hudson. 991 F.2d 132 (4th Cir. 1993). Therefore, the
court must look beyond any single issue, even the specific issue upon which the party prevailed in
the litigation with the government, and consider the "substantial justification" question on the
totality of the circumstances.
Applying the EAJA to EPA's administrative cases, practitioners can find the
"Implementation of the Equal Access to Justice Act in EPA Administrative Proceedings at 40
CFR Part 17. This rule sets of the Respondent's application process, the standards for awards,
allowable fees and expenses, information required from applicants and other rules of procedure.
It is important to note that 17.21 specifically sets forth that Respondent's application shall be filed
and served on all parties in the same manner as other pleadings in the proceeding (Part 22 rules!)
It is an ALT who issues a recommended decision and it is the EAB who has the delegated
authority to take final action. Judicial review of final EPA decisions on awards may be sought as
provided in 5 U.S.C. 504(cX2).
There have been several ALJ rulings on EAJA applications that are useful to note:
In Hoosier Spline Broach Corporation. EAJA Appeal No. 96-2 (July 2,1998) the EAB
ruled that, "even if an agency's position was substantially justified when the underlying action
began, a partial award of EAJA fees may nonetheless by proper if based on a finding that the
agency's position subsequently lost substantial justification." Further, the EAB ruled that a "trier
of fact may not presume that the agency lacks substantial justification merely because it settles a
case on unfavorable terms. In EAJA cases that settle before the merits of the underlying action
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have been adjudicated, the agency's reasons for settlement must be analyzed and may play a
critical role in the substantial justification determination."
In Leo Stangle d/b/a Gopher Choker. Docket No. JJF&R VTJI-96-04 (April 17,1997)
Judge Kuhlman ruled that where a complaint had been withdrawn without prejudice the
Respondent is not entitled to an award under EAJA because he has not demonstrated that he was
a prevailing party in the adversary adjudication for which he seeks the award. The Judge opined
that the result may have been different if the complaint had been dismissed with prejudice.
In L & C Services. Inc.. Docket No. Vn-93-CAA-l 12 (December 16, 1997) Judge
Charneski denied Respondent's EAJA application and ruled that under Section 504 of the EAJA a
prevailing party can recover certain litigation-related fees and expenses unless it is found that the
agency was substantially justified or that special circumstances exist which would make an award
unjust. The government bears the burden of proving that no award should be made. Whether the
government was substantially justified is determined based upon a standard of simple
reasonableness (ie. whether the government's position had a reasonable basis hi law and fact).
However, this was reversed by the EAB on appeal and the EPA was found to have lacked
substantial justification in bringing the action. EAJA Appeal No. 98-1 (January 15 1999).
b. SBRFA
The revisions to EAJA made by the Small Business Regulatory Enforcement Fairness Act
of 1996 (SBREFA), P.L. 104-121, 110 Stat. 857-74, were a significant departure from the state
of EAJA law, which hi general only allows a "prevailing party" to recover attorney's fees where
the position of the government is not substantially justified. In section 331 and 332, SBREFA
expands the circumstances under which the federal government must pay private parties' litigation
costs by providing EAJA awards to nonprevailing parties where "the demand" by the agency is
substantially in excess of the decision of the adjudicative officer and is unreasonable when
compared with such decision, under the facts and circumstances of the case. "Demand" is defined
as "the express demand" of the United States or Agency which led to the adversary adjudication,
but excludes a recitation of the maximum statutory penalty. Additionally, under SBREFA,
awards are no longer limited to parties whose net worth does not exceed $2 million. SBREFA
states that awards may go to any "small entity", a term defined by reference to other statutes (5
U.S.C. 601, 15 U.S.C. 632 and in SBA regulations codified at 13 CFR 121), but which may
include some companies with as many as 1,500 employees and as much as $25 million hi annual
revenues.
The current agency practice of proposing specific penalties in administrative complaints,
consistent with applicable EPA pleading penalty policies, will not result in significantly increased
exposrue to possible EAJA awards under SBREFA. Agency practitioners should craft complaints
and develop litigation strategies with an awareness of the changes, but they should not hesitate to
initiate an action or to seek penalties for clear violations. However, it is important that proposals
for civil penalties continue to be reasonable and appropriate to the facts and circumstances of
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the case. Additionally, it is highly advisable to include as standard language in any consent
agreement a statement that each party agrees to bear its own costs and fees.
If the situation arises in which preparations do not produce enough reliable information to
develop a defensible, specific proposed penalty amount, one of the following options should be
considered. One option is to issuie a pre-filing "show cause" or a settlement letter seeking
additional information on penalty issues. Another approach is in a cover letter accompanying the
complaint, or in the complaint itself, state clearly that the penalty proposed may be adjusted if the
respondent establishes bona fide issues of ability to pay, or other defenses relevant to the
appropriate amount of the proposed penalty. In cases where information relevant to proposing an
appropriate penalty cannot be obtained before issuing the complaint, but there are still reasons to
proceed with the action, the litigation team should consider notice pleading. This notice pleading
approach would postpone the need to make a definite penalty proposal until fiill information about
the case is available.
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VI. The Decision-Makers
a. Administrative Law Judges
EPA uses Administrative Law Judges to preside over the Part 22 APA hearings. The ALJ
is responsible for conducting the formal proceeding, interpreting the law, applying agency
regulations and carrying out the agency policies in the course of the administrative adjudications.
The ALJ is an employee of the agency. However, to ensure the independent exercise of the ALJ's
functions, the judge is not subject to agency efficiency ratings, promotions, or demotions and
compensation is established by the Office of Personnel Management independent of agency
recommendations. The agency can take disciplinary action against an ALJ only when good cause
is established before and determined by the Merit Systems Protection Board after an opportunity
for a hearing.
Generally, the powers and duties of an ALJ derive from Section 556(c) of the APA.
However, Section 556(c) provides that the ALJ's powers and duties are subject to the published
rules of the agency. EPA's ALJ preside subject to 40 CFR 22.04(c). The ALJs authority is very
broad. 22.04(c)(10) explicitly grants the ALJ the authority to "[d]o all other acts and take all
measures necessary for the maintenance of order and for the efficient, fair and impartial
adjudication of issues arising in proceedings governed by these rules."
It is possible that, on occasion, a party may wish to have a Presiding Officer disqualified or
a Presiding Officer may want to withdraw from a particular case. 22.04(d) provides the
procedural authority. In Woodcrest Manufacturing. Inc.. Docket No. 5-EPCRA-96-007 (June
13, 1997) Judge Kuhlman denied Respondent's Motion for Disqualification and held that personal
bias would require disqualification when it is strong enough and when the bias has an unofficial
source. If the ALJ develops strong feelings for or against a party based upon official dealings
with the party or on official exposure to the evidence concerning the parry's behavior, it is not
prohibited because it is inevitable and it is assumed that the ALJ can overcome these feelings and
render an impartial decision. Offering the Respondent an opportunity to discuss settlement during
a tele-conference did not constitute personal bias. On appeal, (EPCRA Appeal No. 97-2 (July 23,
1998)) the EAB held that Judge Kuhlman had the authority under Part 22 to rule on a Motion to
Disqualify the Presiding Officer. The EAB confirmed Judge Kuhlman decision that no personal
bias was shown and disqualification was not required. Citing Litekv v. United States. 510 U.S.
540 (1994) the EAB held that "expressions of impatience, dissatisfaction, annoyance, and even
anger, that are within the bounds of what imperfect men and women, even after having been
confirmed as federal judges, sometimes display will not constitute bias or partiality".
b. Regional Judicial Officers
Regional Judicial Officers are EPA employees, designated by each region to perform a
variety of adjudicatory functions. Their powers and duties derive solely from the delegation that
authorizes their participation in a particular proceeding. For example, in non-APA cases under 40
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CFR Parts 15 and 24, the RJOs are delegated the authority to rule on preheating motions, preside
at preheating conferences and at hearings, issue recommended decisions and, in some cases, issue
final orders. In Part 22 APA proceedings the RJOs are authorized to rule on pre-answer motions
and may also issue final orders on consent and on default. The RJOs also serve as EPA neutrals
for hearings conducted under Part 15 (Contractor Listing Program), Part 24 (RCRA Interim
Status Corrective Action Program), the CERCLA Revised Procedures for Planning and
Implementing Off-site Response Actions, the CERCLA Guidance on Federal Superfund Liens and
the FIFRA Pesticide Applicator Certification Program. RJOs serve as the Presiding Officer in all
non-APA civil penalty cases as well. There is one RJO in each region.
c. Environmental Appeals Board
The Environmental Appeals Board is a four-member appeals body that works directly for
the Office of the Administrator. The Board renders final decisions in all administrative
adjudications brought pursuant to Part 22. Decisions of ALJs are considered "recommended
decisions" that become final actions of the EAB within 45 days of service upon each party.
Appeals of ALJ decisions go to the Environmental Appeals Board. The EAB decides matters
before it by a majority vote. Concurring or dissenting opinions are sometimes issued. Most cases
are decided without oral argument, based upon the administrative record and on written briefs
submitted by the parties. When oral arguments are held they take place at EPA Headquarters and
are open to the public.
The four members of the EAB are appointed by the Administrator and function
independent of all EPA components outside the immediate Office of the Administrator. The
members of the EAB include:
Ronald McCallum who served and EPA's Judicial Officer from 1978 to 1984 and Chief
Judicial Officer from 1984 to 1992. In 1992, when the EAB was created by regulation, he was
named to the Board. From 1974 to 1978 he was an attorney in the Office of General Counsel.
Edward Reich who served as a Legal Advisor to the Administrator, and as Acting
Assistant Administrator and Deputy Assistant Administrator in the Office of Enforcement. From
1988 to 1991 he worked as a senior career officer in the Office of Enforcement responsible for
managing environmental litigation.
Kathv Stein who served as the Director of the RCRA and Air Enforcement divisions
within the Office of Enforcement and Compliance Assurance and as Acting Regional Counsel in
Region m. She also has had experience with the US Department of Justice, the Environmental
Defense Fund and the Maryland Attorney General's Office.
Scott C. Fulton who served as EPA's Acting General Counsel and Principal Deputy
General Counsel and was formerly the Deputy Assistant Administrator for the Office of
Enforcement and Compliance Assurance. He has also served as a trial attorney and supervising
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attorney in the Environmental and Natural Resources Division of the U.S. Department of Justice.
All practitioners should become familiar with the guidance memorandum "Procedures to
Improve Coordination before the Environmental Appeals Board", January 25, 1993. This
document sets forth the required procedures for headquarters and regional coordination when the
agency is considering and/or taking an appeal to the Environmental Appeals Board. While work
has been underway for several years to revise these procedures, this memorandum represents the
current requirements on how to handle adverse administrative decisions at EPA.
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