Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca4-07-02123/USCOURTS-ca4-07-02123-0/pdf.json

Nature of Suit Code: 120
Nature of Suit: Marine Contract Actions
Cause of Action: 

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PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA, 

Party in Interest-Appellee,

and

MARYLAND PORT ADMINISTRATION;

STATE OF MARYLAND CENTRAL

COLLECTION UNIT,

Plaintiffs,

v.

M/V SANCTUARY, her engines, tackle  No. 07-2123

equipment, boilers, furniture, and all

other necessaries thereunto

appertaining and belonging, in rem;

POTOMAC NAVIGATION, INCORPORATED;

PROJECT LIFE, INCORPORATED,

Defendants-Appellants,

and

JOHN CHAMBERLAIN,

Claimant. 

Appeal from the United States District Court

for the District of Maryland, at Baltimore.

William M. Nickerson, Senior District Judge.

(1:07-cv-00602)

Argued: May 13, 2008

Decided: August 25, 2008

Before MICHAEL and DUNCAN, Circuit Judges,

and Jackson L. KISER, Senior United States District Judge

for the Western District of Virginia, sitting by designation.

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Affirmed by published opinion. Judge Michael wrote the opinion, in

which Judge Duncan and Senior Judge Kiser joined. 

COUNSEL

ARGUED: Lawrence Jay Kahn, FREEHILL, HOGAN & MAHAR,

New York, New York, for Appellants. Ryan Douglas Nelson,

UNITED STATES DEPARTMENT OF JUSTICE, Washington,

D.C., for Appellee. ON BRIEF: Alexander M. Giles, SEMMES,

BOWEN & SEMMES, Baltimore, Maryland, for Appellants. Ronald

J. Tenpas, Assistant Attorney General, Environment & Natural

Resources Division, Michael T. Gray, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. 

OPINION

MICHAEL, Circuit Judge: 

The main issue in this appeal is whether the Environmental Protection Agency (EPA) may obtain an administrative warrant to carry out

its authority under the Toxic Substances Control Act (TSCA), 15

U.S.C. § 2601 et seq., to inspect places containing regulated chemical

substances. We hold that EPA has such authority, and we therefore

affirm the district court’s issuance of a warrant authorizing the agency

to inspect the M/V Sanctuary for polychlorinated biphenyls (PCBs).

We also affirm the district court’s preliminary injunction order preventing the Sanctuary’s owner, Potomac Navigation, Inc., from moving the ship from the pier in Baltimore where it is docked. 

I.

A.

The health and environmental risks associated with PCBs are

undisputed. EPA has determined that PCBs are "toxic and persistent,"

may be oncogenic, and "may cause reproductive effects and developmental toxicity in humans." Disposal of Polychlorinated Biphenyls

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(PCBs), Part IV, 63 Fed. Reg. 35,385 (June 29, 1998). Since 1979

TSCA has banned the manufacture, processing, distribution in commerce, or use of PCBs, except "in a totally enclosed manner." 15

U.S.C. § 2605(e)(2)(A)-(B). ("‘[T]otally enclosed manner’ means any

manner which will ensure that any exposure of human beings or the

environment to a [PCB] will be insignificant as determined by the

[EPA] Administrator by rule." Id. § 2605(e)(2)(C)). PCBs may not be

exported for distribution in commerce without an exemption. 15

U.S.C. §§ 2605(e)(2)(A), 2611(a)(2); 40 C.F.R. § 761.20(c). In addition, TSCA regulations prohibit the export, for purposes of disposal,

of PCBs in concentrations of fifty parts per million (ppm) or greater

without an exemption. 40 C.F.R. § 761.97(a). 

TSCA provides EPA with inspection authority. Specifically, "[f]or

purposes of administering [TSCA]," EPA "may inspect any establishment, facility, or other premises in which" substances regulated by the

Act "are manufactured, processed, stored, or held before or after their

distribution in commerce." 15 U.S.C. § 2610(a). In addition, this

inspection authority reaches "any conveyance being used to transport"

a regulated substance "in connection with distribution in commerce."

Id. EPA’s inspection powers "extend to all things within the premises

or conveyance inspected" that "bear[ ] on whether the requirements of

[TSCA]" have been met with respect to regulated substances "within

such premises or conveyance." Id. § 2610(b). 

B.

The Sanctuary, built in 1944, was once a U.S. Navy hospital ship.

The ship was stricken from the Naval Vessel Reports in 1989, and the

government sold the ship later that year to Project Life, Inc. (formerly

Life International) for $10, with the stipulation that the ship would be

used to provide humanitarian services. Project Life docked the Sanctuary at a Maryland Port Authority (MPA) pier in Baltimore, with the

announced purpose of converting the ship into a facility for women

suffering from addiction. The conversion was never accomplished,

and Project Life failed to pay MPA dockage and related charges that

became due. 

On March 9, 2007, in an effort to recover the unpaid charges, the

MPA sued the Sanctuary and Project Life in the District of Maryland.

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A warrant for the arrest of the ship was issued and executed. After a

default judgment was entered against the Sanctuary and Project Life,

Potomac bought the ship for $50,000 at a court-ordered public auction. The October 4, 2007, order confirming the sale gave Potomac

sixty days to tow the ship away from Baltimore, and Potomac advised

the court that the ship would be moved to Piraeus, Greece, or another

location for refurbishment, "most likely as a storage unit, a hotel platform, or other similar use." J.A. 760. On October 30, 2007, shortly

before the Sanctuary’s planned towage, the Basel Action Network

(BAN), an environmental watchdog group, e-mailed Kelly L. Bunker,

PCB Coordinator for EPA’s Region III, which includes Baltimore.

According to its e-mail, BAN believed that the Sanctuary contained

PCBs and would likely be towed to another location and dismantled

in violation of TSCA’s ban on the export of PCBs. 

BAN’s e-mail prompted Bunker to research the Sanctuary’s history

to assess whether it was likely to contain PCBs. Bunker learned from

EPA technical guidance documents that PCBs are most likely to be

present in ships built before the 1979 PCB ban. She learned from a

2001 RAND Corporation report that PCBs were present "in many

plastics, rubbers, adhesives, gaskets, and other commercial nonmetal

products used in Navy ships" and that testing of retired ships indicated that "up to 98% of all the Navy ships awaiting disposal may

contain regulated amounts of PCBs in solid materials." J.A. 487, 517-

18. The Sanctuary’s potential for containing PCBs was also assessed

by Laura A. Casey, a chemist employed in EPA’s Office of Solid

Waste, Hazardous Waste Identification Division, International and

Transportation Branch, who had over nine years’ experience dealing

with PCBs in connection with the disposal of ships. Casey reviewed

data regarding the presence of PCBs on numerous non-combatant

ships similar to the Sanctuary, built between the 1940s and 1970s.

She compiled a list of items and materials on these ships that have

been found to contain PCBs, including electrical cable, rubber and felt

gaskets, insulation material, paints, caulking, and numerous rubber

applications. Casey concluded that the Sanctuary likely contained

materials with PCBs, which are regulated under TSCA. 

After Bunker and Casey completed their analyses, EPA learned

that PCBs were in fact present on the Sanctuary. This information

came from Kevin J. McCabe, managing member of a ship recycling

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firm that considered bidding for the Sanctuary. McCabe reported that

four out of the five paint samples his company took from the Sanctuary tested positive for PCBs in concentrations well over fifty ppm.

EPA also obtained information from Polly Parks, a ship recycling

consultant, who was familiar with deceptive practices occurring in

connection with the disposal of PCB-laden ships built in the same era

as the Sanctuary. According to Parks, the buyer of such a ship often

claims that it will be repaired and refurbished; instead the ship is

towed to a third world country where it is dismantled and sold at a

huge profit on the scrap metal market. 

In early November 2007, pursuant to its authority under TSCA,

EPA requested permission from Potomac to inspect the Sanctuary for

materials containing PCBs. Potomac denied EPA’s request. Shortly

thereafter, EPA (1) applied to the district court for an administrative

warrant authorizing the inspection, and (2) moved for a preliminary

injunction to prohibit Potomac from moving the Sanctuary from the

Baltimore pier until EPA could complete the inspection and determine whether enforcement action was necessary. EPA’s application

and motion were supported in part by the information in the preceding

two paragraphs, which was submitted in the declarations of Bunker,

Casey, McCabe, and Parks. The district court issued the warrant for

the inspection of the Sanctuary and granted the preliminary injunction. The court also denied Potomac’s request for a Franks hearing on

the integrity of the declarations supporting the warrant. 

Potomac appeals, contending that the district court erred in (1) concluding that EPA has warrant authority under TSCA, (2) finding

probable cause to support issuance of the administrative warrant, (3)

concluding that the Sanctuary was a proper location for inspection

under TSCA, (4) denying Potomac’s request for a Franks hearing,

and (5) granting the preliminary injunction that enjoined the towage

of the Sanctuary from Baltimore. 

II.

Potomac argues that EPA lacks warrant authority because TSCA

does not specifically confer it. We review this legal issue de novo,

United States v. Deaton, 332 F.3d 698, 703-04 (4th Cir. 2003), and

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hold that EPA’s inspection authority under TSCA carries with it the

authority to obtain a warrant. 

TSCA explicitly authorizes EPA to inspect a premises or conveyance where there are substances regulated by the Act. 15 U.S.C.

§ 2610(a). The scope of this inspection authority "extend[s] to all

things within the premises or conveyance" that "bear[ ] on whether

the requirements" of TSCA are met. Id. § 2610(b). "When Congress

invests an agency with enforcement and investigatory authority, it is

not necessary [for Congress] to identify explicitly each and every

technique that may be used in executing the statutory mission." Dow

Chemical Co. v. United States, 476 U.S. 227, 233 (1986). Instead,

"[r]egulatory or enforcement authority generally carries with it all the

modes of inquiry and investigation traditionally employed or useful

to execute the authority granted." Id.

Accordingly, courts have consistently held that a federal regulatory

agency is authorized to apply for a warrant to execute a statutory

grant of inspection authority. Marshall v. Barlow’s, Inc., 436 U.S.

307, 325 & n.23 (1978) (holding warrantless inspections under the

Occupational Safety and Health Act unconstitutional, but concluding

that "there would be no occasion for enjoining the inspections authorized" by the statute if the agency obtained a warrant satisfying the

Fourth Amendment); Blackie’s House of Beef, Inc. v. Castillo, 659

F.2d 1211, 1222 (D.C. Cir. 1981) (inferring "from the provisions of

the Immigration and Nationality Act some predicate power to obtain

search warrants in aid of the enforcement activities specifically delineated in the statute, although the statute does not explicitly authorize

such warrants"); Bunker Hill Co. Lead & Zinc Smelter v. EPA, 658

F.2d 1280, 1285 (9th Cir. 1981) (holding that the Clean Air Act’s

grant of the power of entry for inspection provided "sufficient authority to justify obtaining inspection warrants"); Midwest Growers Coop.

Corp. v. Kirkemo, 533 F.2d 455, 462 (9th Cir. 1976) (holding that

"non-consensual administrative searches may be accomplished

through warrants of inspection when the administrative agency is

granted by Congress the power of entry to make its inspections"); In

re Yoder’s Slaughterhouse Site, 519 F. Supp. 2d 574, 579 (D. Md.

2007) (holding that provisions of the Comprehensive Environmental

Response, Compensation, and Liability Act authorizing entry, inspection, and sampling imply warrant authority "as broad as necessary to

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enable the EPA to enter and perform the statutory mission"); Boliden

Metech, Inc. v. United States, 695 F. Supp. 77, 80-82 (D.R.I. 1988)

(holding that warrant authority follows from TSCA’s grant of entry

and inspection authority). 

Potomac argues that in TSCA Congress granted EPA subpoena

power "[i]n lieu of warrant authority." Appellants’ Br. 16. We disagree. EPA’s authority to seek a warrant stems from its inspection

authority. The inspection authority and the subpoena power are separate grants of authority governing separate subjects of investigation.

EPA’s inspection authority extends to the physical inspection of

premises or conveyances, 15 U.S.C. § 2610(a), while its subpoena

power extends to persons (or entities) who may be compelled to testify or to produce reports, documents, or other information, id.

§ 2610(c). Nothing in Congress’s grant of subpoena power indicates

that it intended to preclude EPA from obtaining warrants to implement its inspection authority. 

In sum, EPA may obtain administrative warrants to carry out its

inspection authority under TSCA. 

III.

Potomac argues that even if EPA has warrant authority, the district

court erred in finding probable cause for the issuance of the warrant

to inspect the Sanctuary. On review we determine whether the district

court had a substantial basis for its probable cause determination,

United States v. Hurwitz, 459 F.3d 463, 473 (4th Cir. 2006), and we

"should [pay] great deference" to that determination, Illinois v. Gates,

462 U.S. 213, 236 (1983) (citation and internal quotation marks omitted). 

Probable cause for an administrative warrant may be based on (1)

"specific evidence of an existing violation," or (2) "a showing that

reasonable legislative or administrative standards for conducting an

inspection are satisfied with respect to a particular establishment."

Marshall v. Barlow’s, Inc., 436 U.S. at 320 (citation, internal quotation marks, and alterations omitted). The warrant here was based on

the legislative standard for inspection set forth in 15 U.S.C. § 2610.

We therefore reiterate the statutory standard and consider whether the

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district court had a substantial basis for finding probable cause under

that standard. 

Again, § 2610(a) authorizes EPA to inspect — "[f]or purposes of

administering [TSCA]" — places that include a premises where a regulated chemical substance, including PCBs, is held before or after its

distribution in commerce. Section 2610(b) extends EPA’s inspection

authority to all things in a premises that bear on whether TSCA’s

requirements have been met with respect to the regulated substance

present within the premises. Here, the district court had a substantial

basis for finding probable cause to issue a warrant under the legislative standard in § 2610. Specifically, there was a substantial basis to

find (1) that PCBs, regulated by TSCA, were held on the Sanctuary,

and (2) that EPA required access to the ship to conduct an inspection

for purposes of administering TSCA. 

First, sampling data showed that PCBs were present in paint coatings on the Sanctuary. Moreover, as EPA’s research revealed, it was

likely that PCBs were in, or exposed on the surfaces of, other components, equipment, and materials on the ship. It was also likely that the

PCBs would be in, or on the surfaces of, items that were not being

maintained "in a totally enclosed manner." See 15 U.S.C.

§ 2605(e)(2)(A)-(C). 

Second, based on the demonstrated likelihood of PCB presence on

the Sanctuary, EPA sought the warrant for purposes of administering

TSCA. The specific administrative purposes were set forth in the affidavit of EPA Region III PCB Coordinator, Kelly Bunker, submitted

in support of the warrant application. An inspection was necessary for

EPA to determine whether the Sanctuary was in compliance with

TSCA and regulations governing PCBs. For example, the inspection

would allow EPA to determine whether PCBs located on the Sanctuary were being maintained or used "in a totally enclosed manner," as

required by TSCA. See id. § 2605(e)(2)(A), (C). An inspection was

also necessary to determine whether PCBs on the Sanctuary posed an

unreasonable risk to human health or the environment. This determination would, in turn, allow EPA to take action to abate any risk. For

example, EPA could decide to bring an enforcement action to prevent

the PCBs’ removal from the country and to require their proper disposal. See 15 U.S.C. §§ 2606, 2616. 

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Potomac argues that there was not probable cause to justify the

warrant because its planned refurbishment of the Sanctuary abroad

would not constitute the "export [of] PCBs for distribution in commerce in violation of 15 U.S.C. §2611." Appellants’ Br. 19 (emphasis

added). Thus, according to Potomac, EPA did not seek the warrant for

purposes of administering TSCA. The issue with respect to exportation was immaterial to the determination of probable cause in this

case. The district court issued the warrant because there was probable

cause to believe that PCBs were present on the Sanctuary, rendering

it proper for EPA to conduct an inspection to determine whether

TSCA’s requirements were being met. EPA thus obtained the warrant

pursuant to its statutory authority to administer TSCA. 

IV.

Potomac contends that the warrant was invalid because the Sanctuary does not qualify as a place where an inspection is authorized by

TSCA. Specifically, according to Potomac, the Sanctuary is neither a

premises where PCBs are held "before or after their distribution in

commerce" nor a conveyance being used to transport PCBs "in connection with distribution in commerce." See 15 U.S.C. § 2610(a).

Potomac argues that the Sanctuary does not qualify for inspection as

a premises because PCBs are not being held there before or after their

distribution in commerce. However, Potomac cannot credibly argue

that any PCBs in the coatings (paint, for example), components, or

materials in the Sanctuary were not distributed in commerce before

the ship was built. We therefore agree with EPA that the Sanctuary

is a premises that may be inspected under § 2610(a). Because the

Sanctuary qualifies for inspection as a premises, we will not consider

Potomac’s argument that the ship does not qualify for inspection as

a conveyance. 

V.

Potomac argues that the district court erred in denying it a Franks

hearing. See Franks v. Delaware, 438 U.S. 154 (1978). To obtain a

Franks hearing on the integrity of an affidavit supporting a search

warrant, the movant must make "a substantial preliminary showing

that a false statement knowingly and intentionally, or with reckless

disregard for the truth, was included by the affiant in the warrant affiUNITED STATES v. M/V SANCTUARY 9

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davit." Franks, 438 U.S. at 155-56 (emphasis added). The false statement must, of course, be "necessary to the finding of probable cause."

Id. at 156. EPA represents that Potomac, in its reply brief in district

court, acknowledged that it "‘is unable at this time to point to any specific instances of untrue statements in the application’" for a warrant.

Appellee’s Br. 24. Potomac does not contest this representation.

Indeed, Potomac has not pointed to anything in the record that establishes that it made the substantial preliminary showing, required by

Franks, to the district court. We therefore conclude that the district

court did not err in denying a Franks hearing. 

VI.

Potomac finally argues that the district court erred in granting a

preliminary injunction prohibiting the Sanctuary’s movement from

the pier in Baltimore. We review the decision to grant a preliminary

injunction for abuse of discretion, with factual determinations considered for clear error and legal conclusions considered de novo. SafetyKleen, Inc. v. Wyche, 274 F.3d 846, 859 (4th Cir. 2001). The district

court applied the familiar Blackwelder test in deciding to grant the

preliminary injunction. See Blackwelder Furniture Co. v. Seilig Mfg.

Co., 550 F.2d 189, 193-96 (4th Cir. 1977). 

Potomac argues that the district court erred in finding that "the

potential threat to the public health by the exposure of PCB’s [sic] if

this injunction should be denied far outweighs the potential harm to

Potomac which is essentially an economic loss." J.A. 866; see SafetyKleen, 274 F.2d at 859 (noting that as part of the Blackwelder analysis

a court "balance[s] the likelihood of harm to the plaintiff [if a preliminary injunction is not granted] against the likelihood of harm to the

defendant [if the injunction is granted]"). Potomac does not challenge

the court’s determination that EPA’s interest as plaintiff "is indistinguishable from the public interest." J.A. 865. 

The record amply supports the district court’s finding that the balance of harms weighs heavily in favor of EPA and the public health

interests it represents. EPA presented unchallenged information showing that PCBs are stable (and therefore persistent), mobile, and toxic,

and may have adverse reproductive and developmental effects in

humans. The agency has determined that "any exposure of human

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beings or the environment to PCBs . . . may be significant, depending

on such factors as the quantity of PCBs involved in the exposure." 40

C.F.R. § 761.20. EPA introduced (1) evidence of sampling data showing the presence of PCBs in concentrations greater than fifty ppm in

paint applications on the Sanctuary, and (2) evidence of the likelihood

that PCBs were disbursed on various items and components throughout the Sanctuary. In addition to this information, the district court

considered Potomac’s potential "economic loss with respect to its

venture in regard to the Sanctuary." J.A. 866.

Given the serious health and environmental consequences associated with PCBs, the district court did not clearly err in finding that

the balance of harms tipped sharply in favor of EPA (and the public

interest). In short, the district court did not abuse its discretion in

granting a preliminary injunction (of limited duration) that prevented

the Sanctuary from being moved from the United States while EPA

executed its inspection warrant and considered what, if any, regulatory or enforcement action was warranted. 

* * *

For the foregoing reasons, the district court’s issuance of the

administrative warrant authorizing an inspection of the Sanctuary and

its order preliminarily enjoining removal of the ship from the Baltimore pier are 

AFFIRMED.

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