State ex rel. Brown v. Dayton Malleable, Inc.

438 N.E.2d 120, 1 Ohio St. 3d 151, 12 Envtl. L. Rep. (Envtl. Law Inst.) 21146, 1 Ohio B. 185, 1982 Ohio LEXIS 723

• Court: Ohio Supreme Court
• Decided: August 4, 1982
• Docket: No. 81-1134
• Status: Published

Opinions

Locher, J.

Each party raises a distinct issue. The state argues that the Court of Appeals erred by holding that the schedule of compliance is not an enforceable term or condition of the NPDES permit. DMI contends that the trial court erred by admitting evidence pertaining to DMI’s financial condition. We agree with the state that a schedule of compliance is an enforceable term or condition of an NPDES permit. Otherwise, we affirm the Court of Appeals.

I.

R.C. Chapter 6111 embodies the response of the General Assembly to the Federal Water Pollution Control Act Amendments of 1972. See R.C. 6111.01(L); Section 1342(b), Title 33, U.S. Code. The goal of the federal Act is “eliminating ‘the discharge of pollutants into the navigable waters,’ 33 U.S.C., Section 1251(a)(1) * * EPA v. National Crushed Stone Assn. (1980), 449 U.S. 64, 69.³

Ohio’s participation in this effort includes the power of the Director of Environmental Protection (“director”) to: “Issue, revoke, modify, or deny permits for the discharge of sewage, industrial waste, or other wastes into the waters of the state, and for the installation or modification of disposal systems or any parts thereof in compliance with all requirements of the ‘Federal Water Pollution Control Act’ and mandatory regulations adopted thereunder, and set terms and conditions of permits, including schedules of compliance, where necessary.” (Emphasis added.) R.C. 6111.03(J). R.C. 6111.01(K) defines a “schedule of compliance” as “a schedule of remedial measures including an enforceable sequence of actions or operations leading to compliance with standards and rules adopted under sections 6111.041 and 6111.042 of the Revised Code or compliance with terms and conditions of permits set under division (J) of section 6111.03 of the Revised Code.”

The trial court noted that DMI had admitted violations of R.C. Chapter 6111. “No person shall violate or fail to perform any duty imposed by sections 6111.01 to 6111.08 of the Revised Code, or violate any order, rule, or term or condition of a permit issued by the director of environmental protection pursuant to such sections. Each day of violation is a separate offense.” R.C. 6111.07(A). R.C. 6111.09 establishes a range of penalties for violations and provides, in part: “Any person who violates section 6111.07 of the Revised Code shall pay a civil penalty of not more than ten thousand dollars per day of violation, to be paid into the state treasury to the credit of the general revenue fund.* * * Any action under this section is a civil action * * *.” The Court of Appeals, however, determined that these provisions were not a sufficient basis for assessing a penalty. That court concluded, in its decision on the state’s motion for reconsideration, that the schedule of compliance was in the nature of an “agreement” between the director and DMI, not a term or condition of the permit. In light of the ability of the director to revoke or modify the permit, R.C. 6111.03(J), the Court of Appeals reasoned that a “strict construction” of the penalty provisions of R.C. Chapter 6111 would prohibit imposing “a penalty for delay in the performance of steps in the schedule of compliance.” We disagree.

I A.

“Where the language of a statute is plain and unambiguous and conveys a clear and definite meaning there is no occasion for resorting to rules of statutory interpretation. An unambiguous statute is to be applied, not interpreted." Sears v. Weimer (1944), 143 Ohio St. 312 [28 O.O. 270], paragraph five of the syllabus, quoted with approval in State v. American Dynamic Agency (1982), 70 Ohio St. 2d 41, 45 [24 O.O.3d 90]. See, also, R.C. 1.49. R.C. 6111.03(J) clearly empowers the director to “set terms and conditions of permits, including schedules of compliance * * (Emphasis added.) “Include” is a common word meaning “to place, list, or rate as a part or a component of a whole or of a larger group, class, or aggregate.” Webster’s Third New International Dictionary. See, also, R.C. 1.42. The language of R.C. 6111.03(J), therefore, clearly articulates the intention of the General Assembly that schedules of compliance be considered as terms and conditions of permits.

IB.

If construction of the statutes were necessary, however, we could reach the same conclusion. “It is by now a commonplace that ‘when faced with a problem of statutory construction, this Court shows great deference to the interpretation given the statute by the officers or agency charged with its administration.’ Udall v. Tallman, 380 U.S. 1, 16 (1965). * * *” EPA v. National Crushed Stone Assn., supra, at 83. 40 CFR 122.8(a) expresses the clear policy of the USEPA that schedules of compliance áre conditions of NPDES permits and provides, in part: “In addition to conditions required in all permits for all programs (§ 122.7), the [State] Director shall establish conditions, as required on a case-by-case basis, in permits for all programs under * * * [Section] 122.10(a) (schedules of compliance) * * *.” This administrative regulation also reflects the intent of Congress that schedules of compliance be treated as conditions of permits. See Section 1362(11) (“effluent limitation”), (17) (“schedule of compliance”), Title 33, U.S. Code. “An NPDES permit serves to transform generally applicable effluent limitations and other standards—including those based on water quality—into the obligations (including a timetable for compliance) of the individual discharger, and the Amendments provide for direct administrative and judicial enforcement of permits. §§ 309 and 505, 33 U.S.C. §§ 1319, 1365 (1970 ed., Supp. IV). * * * In short, the permit defines, and facilitates compliance with and enforcement of, a preponderance of a discharger’s obligations under the Amendments.” EPA v. State Water Resources Control Bd. (1976), 426 U.S. 200, 205.

Accordingly, we hold that schedules of compliance are terms or conditions of NPDES permits issued under R.C. Chapter 6111. The parties agreed before the trial court that EPA policy permitted the assessment of a penalty for recalcitrance and indifference. See 13 ERC 2189, 2192-93. Therefore, the trial court did not err by assessing a penalty under R.C. 6111.07(A) and 6111.09 for DMI’s recalcitrance and indifference toward meeting the requirements of the schedule of compliance.

II.

DMI argues that the trial court erred by admitting evidence of DMI’s financial condition. We disagree.

This cause was tried to the court. At trial, DMPs counsel argued that the court should first calculate the amount of the penalty and then consider whether that amount would bankrupt DMI. For this reason, DMI argued, the evidence of financial condition was inadmissible. The trial court agreed with DMPs rationale but disagreed with its conclusion. That is, the court decided to admit the evidence of financial condition⁴ at trial and to “use it in the proper manner” later.

It is fundamental that evidence that is admissible for one purpose may be inadmissible for another purpose. See Fed. Evid. R. 105. DMI has argued throughout this case that evidence of financial condition is admissible for the purpose of determining whether the civil penalty assessed by the court would result in bankruptcy. Initially, the trial court admitted this evidence for that purpose. The state contends that a civil penalty should also be of sufficient amount to deter future violations. The trial court accepted this reasoning as well. Under either analysis, the evidence is admissible. The question, however, becomes whether the court used it properly. See Giannelli, Ohio Evidence Manual, Author’s Comment, 25-26, Section 105.01 (1982), citing 21 Wright & Graham, Federal Practice and Procedure, Section 5067.

The trial court did, indeed, use this evidence properly. The court’s opinion reflected a detailed analysis and calculation of the penalty in light of USEPA policy. 13 ERC 2189, 2193-95. Then, the court considered the evidence of financial condition.

“As [sic] this point DMI may well ask why the civil penalty here assessed is so much greater than that assessed in U.S. v. Velsicol Chemical Corp. * * * [(D.C., W.D. Tenn., 1978), 8 ELR 20745], where from the facts given in the report of that case the violations there were more severe than they were in the case at bar. The answer lies in the comparative size of the enterprises concerned. As indicated previously, the report of Yelsicol does not indicate the size of that business. The same can be said of other cases cited by DMI. A $30,000 civil penalty against DMI, considering its size, would amount to little more than ‘a slap on the wrist,’ while it might throw a small enterprise out of business. U.S. v. J. B. Williams Co., supra [(C.A. 2, 1974), 498 F.2d 414]. The penalty is supposed to be a deterrent to violation, insofar as the violator is concerned, and an example to others, not just an effluent or discharge fee which might be considered nothing more than the cost of doing business. U. S. v. ITT Continental Baking Co., 420 U.S. 223, 231 * * *; U. S. v. Papercraft Corp., 393 F. Supp. 408, 420. Thus, DMI’s ability to pay is a significant factor.” 13 ERC, at 2195. The trial court, therefore, used the evidence of financial condition merely to insure that the penalty it had calculated would not be so large as to send DMI into bankruptcy but would be large enough to deter future violations. That is, the court did not, as DMI argues, increase the penalty because of DMI’s solid financial condition.

Federal courts have also observed that civil penalties serve to deter future violations of the Federal Water Pollution Control Act. See United States v. Atlantic Richfield Co. (E.D. Pa. 1977), 429 F. Supp. 830, 841, affirmed sub. nom. United States v. Gulf Oil Corp. (C.A. 3, 1978), 573 F. 2d 1303, and the Federal Trade Commission Act. See United States v. ITT Continental Baking Co. (1975), 420 U.S. 223, 231-32; United States v. Swingline, Inc. (E.D. N.Y. 1974), 371 F. Supp. 37, 47; United States v. J. B. Williams Co., Inc. (S.D. N.Y. 1973), 354 F. Supp. 521, 548, affirmed in part and reversed in part in 498 F. 2d 414. One commentator has stated succinctly the principle as applicable to water pollution cases: “[B]ecause the function of a monetary penalty is to deter the polluting activity altogether and thus not give rise to the penalty at all, the amount of the penalty must be greater than abatement or compliance costs.” (Emphasis sic.) Notes, Assessment of Civil Monetary Penalties for Water Pollution: A Proposal for Shifting the Burden of Proof Regarding Damages, 30 Hastings L. J. 651, 670.

R.C. 6111.09 permits a penalty of $10,000 or less for each day of violation. Both parties agreed that USEPA policy should be the standard for determining the amount of penalty. See 13 ERC 2189, 2193. So long as the amount assessed is less than $10,000 per day of violation, discretion to fix that amount lies in the trial court. Cf. United States v. Ancorp National Services, Inc. (C.A. 2, 1975), 516 F. 2d 198, 202; United States v. J. B. Williams Co., Inc., supra (498 F. 2d 414), at 438. If the trial court had assessed the maximum penalty for each day of violation, the total penalty would have been approximately $7,000,000. Instead, the amount assessed was less than ten percent of that figure and in the lower third of the range in which the penalty could, according to expert testimony, be expected to have a material effect. In assessing the penalty, the trial court did not demonstrate an “ ‘unreasonable, arbitrary or unconscionable attitude.’ ” See Dayton, ex rel. Scandrick, v. McGee (1981), 67 Ohio St. 2d 356, 359 [21 O.O.3d 225].⁵ The court, therefore, did not abuse its discretion.

Accordingly, we reverse the holding of the Court of Appeals that the schedule of compliance was not a term or condition of DMI’s NPDES permit and remand the cause to the Court of Appeals for further proceedings consistent with this opinion.

Judgment accordingly.

Celebrezze, C.J., W. Brown and Sweeney, JJ., concur. Holmes, C. Brown and Krupansky, JJ., concur in part and dissent in part.

3 The United States Supreme Court outlined the structure of the federal Act in 449 U.S., at 69 et seq.

4 The state introduced its evidence through exhibits, DMI’s financial statements, and a qualified financial expert. The evidence of approximate after-tax income and dividends was: in 1978, $2.2 million income, $2 million dividends; in 1977, $5.9 million income, $2.2 million dividends; in 1976, $7.7 million income, $2 million dividends; and in 1975, $6.3 million income, $1.8 million dividends. From this and other evidence, the expert concluded that a penalty in an amount greater than $125,000 but less than $1,250,000 would have a material effect on DMI and would require reporting by DMI’s auditors.

5 DMI makes a passing reference in its brief to the prohibition against “excessive fines” in Section 9 of Article I of the Ohio Constitution. DMI does not, however, explain why we should apply this language in the civil context. We note that the Eighth Amendment to the United States Constitution contains identical language, and that the entire amendment applies only to criminal cases. Ingraham v. Wright (1977), 430 U.S. 651. Furthermore, penalties assessed for discharge of oil into navigable waters under the Federal Water Pollution Control Act, Section 1321(b)(6), Title 33, U.S. Code, do not trigger the federal constitutional protection afforded to a criminal defendant. United States v. Ward (1980), 448 U.S. 242, rehearing denied in 448 U.S. 916.