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. e du/thir dc ir c uit_1998/183Filed August 5, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 96-5761

UNITED STATES OF AMERICA

v.

ANTHONY DELL'AQUILLA, Enterprises and Subsidiaries;
HARRY GRANT; SANDALWOOD CONSTRUCTION
CORPORATION,

Harry Grant, Sandalwood Construction Corporation, Appellants

ON APPEAL FROM THE UNITED STATES

DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY (D.C. Civ. No. 88-3232)

ARGUED October 30, 1997

Before: Nygaard, McKee and Weis, Circuit Judges

(Filed: August 5, 1998)

Roy Alan Cohen Charles E. Erway, III (Argued) Toby A. Holbreich Porzio, Bromberg & Newman, P.C.

163 Madison Avenue Morristown, NJ 07962-1997

Attorneys for AppellantsFaith S. Hochberg

United States Attorney Peter G. O'Malley Assistant United States Attorney Susan Handler-Menahem (Argued) Assistant United States Attorney 970 Broad Street, Suite 700 Newark, New Jersey 07102

Attorneys for Appellee

OPINION OF THE COURT

McKee, Circuit Judge.

We are asked to review the district court's grant o f summary judgment in favor of the United States and against Harry Grant and Sandalwood Corporation. The

court ruled that Grant and Sandalwood were liable f or violations of the Clean Air Act, 42 U.S.C. S 7401 e t seq., ("CAA"), and the National Emission Standard for Haz ardous Air Pollutants established for asbestos, 40 C.F.R. pt. 61, subpt. M. ("NESHAP"), as a matter of law, and asses sed penalties against Grant and Sandalwood in the amoun t of $2,975,000 under 42 U.S.C. S 7413(b). That sum repr esents the maximum fine for each violation for each day th e violation existed.

We will affirm the grant of summary judgment in fav or of the United States based upon Grant's and Sandalwood 's non-compliance with an EPA compliance order for eac h day they were "operators" beginning on June 29, 1988. However, since we conclude that there is a genuine issue of

material fact as to the three visible emissions tha t were charged, we will vacate that portion of the distric t court's order that is based upon those three violations, an d remand for further proceedings consistent with this opinion. We also conclude that there is a genuine i ssue of

material fact as to whether Grant and Sandalwood functioned as operators under the CAA until Septemb er 14, 1988. Finally, we hold that the district court erre d in calculating the fine Grant and Sandalwood must pay.

2Therefore, on remand, the United States must establ ish the

number of days that Grant and Sandalwood functioned as operators, and the district court will recalculate penalties and fines accordingly.

I.

This matter concerns approximately sixty-five acres of waterfront property located at 1301 Hudson Street, Hoboken, New Jersey ("Hoboken property"). It is und isputed that Anthony Dell'Aquilla is the owner of this prop erty. On May 5, 1988, Dell'Aquilla and Grant entered into an Agreement to Form Joint Venture ("Agreement") to de velop the Hoboken property. Under the terms of the Agreem ent, Grant would become the project manager in charge of the "overall management and control of the business and affairs of the venture." App. at 280. The Agreement outlined the responsibilities and representations relevant t o the environmental condition of the property. It provide d that, in the event that any hazardous environmental conditio n was discovered on the property, Dell'Aquilla would cure the condition at his own expense and indemnify Grant ag ainst any and all "damages, remedial orders, judgments or decrees, and all costs and expenses related thereto ." App. at 277. According to Grant, Dell'Aquilla also provi ded him with copies of correspondence from contractors cert ifying that the property and buildings on the property had been inspected and were free of asbestos. Id. at 539. Th e Agreement further provided that Grant would receive a joint ownership interest in the property contingent upon refinancing. However, the refinancing was neverfina lized, and Grant also learned that Dell'Aquilla could not convey clear title so Grant never obtained an ownership in terest under the Agreement.

Grant invested time and money developing the Hoboke n property in his role as project manager. He and his wife were the majority shareholders in Sandalwood. Sandalwood's responsibilities included hiring engin eers and architects to develop the Hoboken property, and con tracting for the demolition of the buildings already on the property and removal of the resulting debris. Id. at 164 & 2 29. Grant

3also incorporated Grant Marina Urban Renewal Corpor ation

to participate in the development.

The development of the property began on June 10, 1988, with the demolition of existing buildings. On June 17, 1988, the Environmental Protection Agency (EPA) sent inspectors Robert Fitzpatrick and Jose Rodriguez to the property because the EPA had not been notified of t he demolition as required by law. App. at 483. While t here, Inspector Fitzpatrick observed insulation that appe ared to be asbestos containing material ("ACM") covering se veral pipes in one of the demolished buildings. He also n oticed that the debris from the demolition appeared to con tain

ACM. Id. at 21-22. His observations were corroborat ed when subsequent tests performed upon samples taken from the area established they contained asbestos.

Fitzpatrick returned to the Hoboken property severa l times during the summer of 1988. During these visit s, he

witnessed numerous violations of state and federal

environmental laws. The violations included the con tinued unauthorized demolition of ACM structures, visible emissions of ACM dust, improper removal of ACM, and inadequate wetting of the ACM which allowed particl es to become airborne. On June 29, 1988, the EPA issued a compliance order under S 112 of the CAA in which it commanded Dell'Aquilla, Grant and Sandalwood to com ply with all federal asbestos regulations. However, des pite the notice, the parties continued the demolition in the same manner that had given rise to the EPA notification.

On July 22, 1988, the government filed a complaint against Dell'Aquilla, Grant and Sandalwood alleging a total of 119 violations of asbestos-related regulations, and seeking injunctive relief and civil penalties under the CAA and NESHAP. Dell'Aquilla settled with the governmen t and agreed to pay a disclosed amount in fines ($400,000 ). The government then moved for summary judgment against

Grant and Sandalwood. Grant and Sandalwood did not dispute the violations except for allegations that visible emissions of asbestos occurred on three dates (June 27, July 7, and July 13, 1988). However, Grant and Sandalwood argued that they were not liable under t he regulations because they were not "owners or operat ors" of

4the Hoboken property. See 40 C.F.R. S 61.02. The di strict

court held that they were "operators", and found th em in violation of the regulations.1

The court imposed the statutory maximum penalty of $25,000 per day for each violation for a total fine of $2,975,000. Grant and Sandalwood filed a motion to amend and alter the judgment seeking to reverse the penalty amount. However, the court refused to recon sider the amount of the penalty because it concluded that Grant had initially failed to submit evidence of his fina nces. This appeal followed.

Grant and Sandalwood argue that: (1) there are genu ine issues of material fact concerning their status as "owners or operators" of the Hoboken property, (2) the governm ent failed to make a prima facie case for each of the 1 19 violations alleged, and (3) the district court abus ed its discretion in failing to reconsider the $2,975,000 penalty in light of Grant's financial situation. We have juris diction over this appeal pursuant to 28 U.S.C. S1291.2

II.

The CAA was enacted, in part, "to protect and enhan ce the quality of the Nation's air resources." 42 U.S. C. S 7401(b)(1). In order to meet this objective, Cong ress authorized the EPA to establish emission standards for enumerated hazardous air pollutants. 42 U.S.C.

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1. The district court also denied the government's request for injunctive relief because it concluded that the government had not established that Grant and Sandalwood were currently engaged in or p lanned to engage

in activities which would lead to further violation s. D. Ct. Op. at 20.

2. We exercise plenary review. Hamilton v. Leavy, 1 17 F.3d 742, 745 (3d Cir. 1997) (citation omitted). Summary judgment is appropriate when the pleadings and other submissions show that there is no genuine issue as to any material fact and that the moving party is e ntitled to judgment as a matter of law. Fed. R. Civ. P. 56; see also, Bank of Nova Scotia v. Equitable Fin. Management, Inc., 882 F.2d 81, 83 (3 d Cir. 1989). The "mere existence of some alleged factual dispute bet ween the parties will not defeat an otherwise properly supported motion f or summary judgment; the requirement is that there be no genui ne issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 24 2, 247-48 (1986).

5S 7412(d)(1995). The asbestos standards, at 40 C.F. R. pt.

61, subpt. M, establish mandatory standards for the renovation and demolition of a facility that contai ns asbestos, and for the disposal of asbestos. A viola tion of

this NESHAP constitutes a violation of the CAA. See 42

U.S.C. S 7412.

A. Liability as Operator

The CAA imposes strict liability upon owners and operators who violate the Act. See United States v. B & W Inv. Properties, 38 F.3d 362, 367 (7th Cir. 1994). Therefore, although Grant and Sandalwood argue that Dell'Aquil la and/or his agents led them to believe that any asbe stos on the property had properly been removed and all nece ssary permits had been obtained, see Appellants' Br. at 8 -10, those assertions are not relevant to our analysis, and we need not respond.

The CAA defines an "owner or operator" as "any pers on who owns, leases, operates, controls, or supervises a stationary source." 40 C.F.R. 61.02. A stationary s ource is "any structure, facility, or installation which emi ts any air pollutant which has been designated as hazardous by the

Administrator." Id. Grant and Sandalwood concede th at the property is a "stationary source" and only challeng e their status as "owners or operators" of the property.

It is clear that neither Grant nor Sandalwood were owners of the Hoboken property. Under the Agreement
, Grant's procurement of refinancing for the property was a condition precedent to the fruition of his ownershi p interest. In addition, as mentioned above, the cont emplated conveyance of an ownership interest under the Agree ment never occurred because Dell'Aquilla could not conve y clear title. Accordingly, Dell'Aquilla remained the sole owner of the property. However, it is now axiomatic that a n on-owner can still be liable as an "operator." Moreover, our determination of whether one is an operator or owne r under

the CAA must be conducted in a manner consistent wi th the broad reach of the statute. See, e.g., United S tates v. Tzavah Urban Renewal Corp., 696 F. Supp. 1013, 1021 (D. N.J. 1988) (" `[O]wner or operator' is defined broa dly for purposes of asbestos regulations.").

6Here, the district court relied in part upon United States

v. Walsh, 783 F. Supp. 546 (W.D.Wash. 1991), aff'd, 8 F.3d 1013 (9th Cir. 1993), to conclude that Grant and Sandalwood were not shielded from liability merely because they never acquired legal title. In Walsh, the cour t opined that a person is strictly liable under the CAA if h e or she had "significant or substantial or real control and supervision over a project." Id. at 548. Although w e are not bound by the holding in Walsh, we agree with the di strict court that the analysis in Walsh is correct.

The control and supervision that Grant and Sandalwo od exercised over the project was more than sufficient to support the district court's conclusion that they w ere operators under the CAA. For instance, Grant negoti ated

the contracts for the demolition work that was done on the project. App. at 183-85. During his deposition, Gra nt described his role in the project as follows: "I me t the [contractors], I review which price is better. We d iscussed with our people which [sic] better to hire, et cete ra, et cetera." Id. at 184. See Tzavah Urban Renewal Corp. , 696 F. Supp. at 1021 (finding that defendants who were charged with hiring and firing contractors were "op erators" under the CAA). Grant signed the demolition contrac ts on
behalf of Sandalwood and Grant Marina. The contract ors he retained were involved with all aspects of the p roject from demolition to asbestos clean-up. In addition, Grant was regularly on the property and witnessed the dem olition of several of the asbestos-infested buildings. App. at 244.

Grant argues that much of what he said during his deposition should have been disregarded because he does not have a strong command of the English language. However, the district court properly rejected that assertion. Grant was represented by counsel during all phases of these proceedings. Moreover, he had a sufficient co mmand of English to enter into an intricate agreement wit h Dell'Aquilla, incorporate two companies, and negoti ate
construction contracts as well as contracts with en gineers

and architects.

Grant clearly possessed "significant or substantial or real control and supervision" and was therefore an "oper ator" within the meaning of the CAA. Walsh, 783 F. Supp. at

7548. Even though his formal role as owner or projec t

manager never materialized, he clearly functioned i n that capacity as evidenced by the control he exercised o ver the project. Therefore, the district court properly con cluded that he was the functional equivalent of an "owner" or "manager."

Sandalwood attempts to evade liability by shifting responsibility to Grant Marina. Sandalwood argues t hat even if Grant was an operator of the property, Sand alwood was not an operator because Grant Marina was specif ically created to participate in the Hoboken development.3 The precise point at which Grant Marina began to exerci se responsibility over the property is unclear. Howeve r, it is clear that Sandalwood was in existence prior to Gra nt Marina and was active in the daily operations of th e property. Grant stated that Sandalwood's responsibi lities in the project included: "hir[ing] attorney[s], engine er[s], architect[s] or anything like that to work on the s ite." App.

at 163. There is also uncontradicted evidence that Sandalwood continued to be involved in the project after the issuance of the compliance order on June 29, 19 88. For example, a check dated July 11, 1988, in the amount of $25,000 payable to cash was signed by Sandalwood, a nd the checkbook register indicates that the proceeds of that check were intended for one of the contractors. App . at 256. The record also contains a letter dated July 28, 19 88, from Sandalwood to L. Corio & Sons, Inc. The letter stat es, in part, that: "[t]his letter constitutes a modificati on of the contract between Sandalwood Construction Corp., contractor, and L. Corio and Sons, Inc., sub-contra ctor, for demolition work at [the Hoboken property]." This le tter was signed by Sandalwood, and there is no reference

whatsoever to Grant Marina. Id. at 415. Sandalwood clearly exercised sufficient control over the development o f the property to qualify as an "operator." See generally , B & W Inv. Properties, 38 F.3d at 367 ("B & W exercised c ontrol over the parcel sufficient to bring [it] within the scope of `owner or operator' designation because its name ap peared on court papers and on a contract with an asbestos cleanup company."). Thus, the district court correctly c oncluded

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3. Grant Marina was not a named party in this actio n.

8that there were no genuine questions of material fa ct as to

the operator status of either Grant or Sandalwood.

The 119 charged violations include a violation for each of the sixty-seven days of non-compliance from June 29

, 1988, until the Agreement was terminated on Septemb er 14, 1988. Grant testified at his deposition that, t o the best of his knowledge, he visited the site each day from the beginning of the demolition until the demolition wa s completed; however, the record is unclear as to whe n demolition was completed. Although it may have cont inued until September 14, 1988, there is nothing to estab lish that its duration was coterminous with the Agreement. Similarly, although Sandalwood clearly functioned a s an operator, this record also fails to establish how l ong Sandalwood acted in that capacity.

In United States v. Bestfoods, ___ S. Ct. ___, 1998 WL 292076*7 (1998), the Supreme Court stated:

under CERCLA, an operator is simply someone who directs the workings of, manages, or conduct s the affairs of a facility. To sharpen the defini tion[of operator] for purposes of CERCLA's concern w ith environmental contamination, an operator mus t manage, direct, or conduct operations specif ically related to pollution, that is, operations ha ving to do with the leakage or disposal of hazardous wa ste, or decisions about compliance with environmenta l regulations.

Although the Court was there addressing the definit ion of "operator" in CERCLA, and not the CAA, the purposes of the two statutes is the same, and the language in q uestion is nearly identical. Accordingly, the Court's gloss on the CERCLA definition is relevant to our inquiry. Grant and Sandalwood were clearly involved with contracts rel ating directly to the polluting activity beginning with t he first notice on June 29, 1988. However, that does not mea n that either or both continued to function in that capaci ty until the Agreement terminated.4 Thus, we conclude that t he

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4. In United States v. Bestfoods, et al., S. Ct., 1 998 WL 292076 (1998), the Supreme Court analyzed the liability of a paren t corporation for a

9district court erred in assuming that Grant and

Sandalwood could be held liable for each violation for every day until September 14, 1988.

Grant and Sandalwood also challenge six violations of 40 C.F.R. S 61.146 concerning notice to the EPA based upon their assertion that they were not "owners or opera tors" of the Hoboken property. As discussed above, we find t hey were operators; accordingly, this challenge is with out merit. Moreover, as we discuss infra, it was not preserved

.

B. Waiver

On appeal, Grant and Sandalwood attempt to argue th at the government did not present a prima facie case f or 34 demolition related NESHAP violations, and 18 dispos alrelated violations. See Appellants' Br. at 27-37, P oints II & III. The government asserts that this attack has be en waived, except insofar as appellants challenge viol ations for visible emissions related to disposal on June 27, J uly 7, and July 13, 1998. See Appellee's Br. at 19. Appell ants' attempt to counter the government's assertion of wa iver by arguing that they "maintained throughout their brie fs below that the asbestos NESHAPs did not apply," and that their general assertion before the district court is suff icient to preserve the more specific argument raised here. Re ply Br.

at 6.

Third Circuit Court of Appeals Local Appellate Rule s require that each appellant's brief contain "a desi gnation by reference to specific pages of the appendix or plac e in the proceedings at which each issue on appeal was raise d, objected to, and ruled upon . . . ." 3d Cir. L.A.R. 23.1. Appellants' brief states that the insufficiency of the

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subsidy under the analogous Comprehensive Environme ntal Response, Compensation and Liability Act of 1980 ("CERCLA"). The Court held that a parent corporation can be liable "both directly, when the parent itself operates the facility, and indirectly, when the cor porate veil can be pierced under state law." 1998 WL 292076 *4. Althou gh we are not confronted with issues of separate corporate identi ty, we mention

Bestfoods because it illustrates that the issue of Sandalwood's tenure as an operator is not as "clear cut" as the United Sta tes suggests.

10government's prima facie case was raised at "Add-2, pp.3-4,

14." See Appellants' Br. at 2. Those references are to the district court's opinion. At the relevant portions of those pages the district court stated that Grant and Sand alwood "do not contest" several of the government's allega tions, see D. Ct. Op. at 4, "nor do the defendants deny the pr esence of ACM . . . [t]hus, the demolition of structures c ontaining verified ACM and the witnessed emissions support th e Court's conclusion that visible emissions of asbest os occurred on all of the days alleged." Id. at 14. Th e appellants' brief also states the following: "[o]n summary judgment below, the government incorrectly claimed that appellants were not challenging any of the alleged NESHAP violations other than the visible emissions. (CITE) That is incorrect." Appellants' Br. at 31. Appellants appar ently had no more success finding a reference where the argum ent was preserved than we did as no "cite" is provided. Moreover, we have reviewed the Appendix submitted b y the appellants in its entirety, and we do not find any assertion sufficient to preserve this issue on appeal.

We have previously noted that, absent exceptional circumstances, an issue not raised in district cour t will not be heard on appeal. Fleck v. KDI Sylvan Pools, Inc. , 981 F.2d 107, 116 (3d Cir. 1992). "Exceptional circumst ances have been recognized when the public interest requi res that the issue[s] be heard or when a manifest injustice would result from the failure to consider the new issue[s ]." Altman v. Altman, 653 F.2d 755, 758 (3d Cir. 1981) (citati ons omitted). We find no such exceptional circumstances here. Accordingly, appellants have waived much of their challenge to the sufficiency of the government's ev idence to support the NESHAP violations. However, the governm ent concedes that appellants did not waive their challe nge to
the three visible emissions of asbestos in violatio n of 40 C.F.R. S 61.152(b). Accordingly, we turn our attent ion to

those violations.

C. Visible Emissions

The district court held that the government had established that Inspector Fitzpatrick witnessed vi sible emissions on June 27, 1988, July 7, 1988, and July 13,

111988. The court cites "Plaintiff's Exhibit 5, 73-74 , 77-79,

89-90, 92-94" for that finding. D. Ct. Op. at 14. N either appellants nor the government have included that ex hibit in the Joint Appendix filed in this court. We have, ho wever, reviewed Inspector Fitzpatrick's affidavit, and the portions of the transcript from his deposition that are incl uded in the Joint Appendix. That evidence establishes that the inspector saw what he believed to be visible emissi ons of asbestos on June 27, 1988 (Fitzpatrick Aff. P 7), a nd July 7, 1988 (Fitzpatrick Aff. P 11), but it does not me ntion witnessing any emissions on July 13, 1988 (Fitzpatr ick Aff. P 12). App. at 22-23. Samples that the inspector to ok on June 27 and July 7 tested positive for asbestos. Al though we find evidence of only two visible emissions, Gra nt and Sandalwood do not dispute that there were three. Ra ther, they contend that the government failed to establis h as a

matter of law that the three emissions were covered by NESHAP. We agree.

Section 61.152(b) of the asbestos NESHAP states tha t each owner or operator of any source shall "[d]isch arge no visible emissions to the outside air during the col lection, processing (including incineration), packaging, transporting, or disposition of any asbestos-contai ning waste material generated by the source." 40 C.F.R. S 61.149. "Visible emissions" are "any emissions co ntaining particulate asbestos material that are visually det ectable

without the aid of instruments." 40 C.F.R. S 61.141 (1988).5 Grant and Sandalwood argue that, even though the inspectors saw dust and debris, the government did not establish that the emissions contained asbestos, or even that they came from asbestos-infested buildings. Appellants' Br at 34.

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5. The current regulations clarify this definition. "Visible emissions" is currently defined as "any emissions, which are visu ally detectable without the aid of instruments, coming from RACM or asbestoscontaining waste material, or from any asbestos mil ling, manufacturing, or fabricating operation." 40 C.F.R. S 61.141 (1997 ). For purposes of this appeal, however, the more ambiguous definition foun d in the regulations that were in place at the time of the Hoboken prope rty development is applicable.

12The district court relied upon United States v. Mid west

Suspension and Brake, 824 F. Supp. 713, 730 (E.D. M ich. 1993), aff'd, 49 F.3d 1197 (6th Cir. 1995), for sup port of its conclusion that summary judgment was warranted as t o these visible emissions. In Midwest Suspension, the government had proven through circumstantial eviden ce that visible emissions, as defined under NESHAP, ha d been observed on three occasions. During the first occas ion, an EPA inspector observed emissions while a dumpster w as being unloaded at a landfill. Id. at 729. After thi s emission settled on top of a box, a sample was taken and tha t sample later tested positive for asbestos. On the s econd occasion, the government presented evidence that a sample of material that had been lying loose in a dumpster prior to transport tested positive for asbestos. An EPA insp ector followed that dumpster as it was being transported and he observed a dust emission from the dumpster while it was being unloaded. Id. The court noted that although t hat dust was not tested, it could reasonably be inferred tha t the discharge came from the lose material that had been tested. The last visible emissions observed were discharged from a dumpster as it was being emptied in a landfill. The EPA inspector did not take samples of those emissions, but he testified that the emissions were "rust colored, wh ich suggests that significant component of the emission was shot blast waste." Id. at 730. According to the ins pector, this type of waste usually contains asbestos. Based on this evidence, the court concluded that the government h ad met its burden at trial. See also, United States v. Hug o Key and Son, Inc., 731 F. Supp. 1135, 1271 (D. R.I. 1989) ( finding

a S 61.141 violation where evidence that friable as bestos material fell to the ground and remained there with no precautions to contain the material).

Here, the inspector saw ACM in dry debris on the ground, app. at 22-23, and contractors loading demo lition debris into dumpsters, id. at 23. The debris in the area was not wet down. id. Samples, which later tested posit ive for asbestos, were taken on June 27 and July 7. However , the samples that were taken were not samples of the "du st" from the emissions. Moreover, the government did no t show the proximity of the visible emissions either to th e area where the contractors were loading debris or to the area

13where the asbestos-infested buildings were being

demolished. Inspector Fitzpatrick also failed to de scribe the emissions as containing any specific type of "rust color" waste that may suggest the presence of asbestos. Mo reover, unlike Midwest Suspension, there is no indication t hat the two positive test samples were taken from settled

emissions. The evidence does not even establish tha t the samples were taken in the vicinity of the visual em issions. The inspector's affidavit is certainly consistent w ith a

conclusion that the visible emissions contained asb estos. However, summary judgment requires more than a possibility or even a probability that it was asbes tos. The government's proof must be sufficient to establish that fact as a matter of law. The proof here is too tenuous t o pass that test. Moreover, we must draw all reasonable in ferences in favor of Grant and Sandalwood, the nonmoving par ties. Josey v John R. Hollingworth Corp. 996 F. 2d 632, 6 34 (3d Cir. 1993).

Accordingly, the government did not establish that the visible emissions contained asbestos, and summary judgment as to those violations was inappropriate. See generally, United States v. Owens Contracting Servs ., Inc., 884 F. Supp. 1095 (E.D. Mich. 1994) (concluding tha t there must be some proof that the visible emissions conta ined
asbestos).

III. Maximum Penalty

42 U.S.C. S 7413(b) was amended in 1990 to read, in part, as follows:

The Administrator shall, as appropriate . . . commence a civil action . . . to assess and recover a civil penalty of not more than $25,000 per day for each vi olation.

42 U.S.C. S 7413(b) (West 1995) (emphasis added). P rior to the 1990 Amendments, the CAA provided that the civi l penalty would not exceed "$25,000 per day of violat ion." 42 U.S.C. S 7413(b) (West 1988) (emphasis added). Thus , it is not clear whether the pre-Amendment maximum fine of $25,000 could be imposed on each violation for ever y day of the violation, or if it was to be limited by the number of days the owner/operator was in violation regardless of the

14number of violations on a given day. However, the d istrict

court concluded that either version of the statute allowed it to impose the maximum fine for each violation, for each day the violation existed, and that the 1990 Amendments merely clarified that congressional intent. See D. Ct. Op. at 15. That conclusion is not challenged on appeal.6 Appellants do argue that the district court abused its discretion in determining the amount of the fine, b ut they do not challenge the court's interpretation of the statute. Since appellants do not challenge that ruling here, we will proceed on the assumption that the 1990 Amendments apply. We will limit our inquiry to whether the cou rt abused its discretion in setting the amount of the fine at the statutory maximum.

42 U.S.C. S 7413(e)(1) provides in relevant part as follows:

In determining the amount of any penalty to be

assessed . . . the administrator or the . . . court shall take into consideration (in addition to such other factors as justice may require) the size of the business, the economic impact of the penalty on the bu siness, the violator's full compliance history and g ood faith efforts to comply, the duration of the viola tion . .. payment of the violator of penalties previou sly assessed for the same violation, the economic benefit of the noncompliance, and the seriousness of the vi olation.7

(emphasis added). The total amount of the fines res ulting from assessing $25,000 per day for each of 119 viol ations the court found from June 28, 1988 (the date of the first compliance order) to September 14, 1988 (the date t he Agreement was terminated) was $2,975,000. The distr ict

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6. Although we need not decide this issue in this a ppeal, we note that there is substantial precedent supporting the distr ict court's interpretation. E.g. Midwest Suspension, 824 F. Sup p. at 733-34; United States v. A.A. Mactal Constr. Co., 22 Envtl L Rep. 21200 (applying the

1990 amended Act to violations that occurred in 198 8 and 1989); Atlantic States Legal Found., Inc. v. Tyson Foods, Inc., 897 F.2d 1128 (11th Cir. 1990) (applying a similar provision in t he Clean Water Act).

7. The government misquotes this statute in its bri ef. It sets forth the factors included in the statute, but omits "the eco nomic impact of the penalty on the business," from the quotation. See A ppellee's Br. at 36.

15court relied upon our holding in Public Interest Re search

Group of New Jersey, Inc. v Powell Duffryn Terminal s, Inc., 913 F.2d 64 (3d Cir. 1990) ("PIRG"), to begin with this maximum amount, and proceeded by determining whethe r any of the specified considerations in S 7413(e)(1) justified mitigation of that total. The court stated "[w]hen imposing a penalty, courts may start with the statutory maxi mum and then consider factors in mitigation of the maxi mum." D. Ct. Op. at 16 (citing PIRG). The court concluded that neither the elaborated factors, nor the interests o f justice supported mitigating the fine. The court specifical ly refused to mitigate the fine based on Grant's bankruptcy.

The Court will not mitigate the civil penalty based upon

Grant's filing for Chapter 11 Bankruptcy . . . There is nothing to indicate that Grant cannot afford the penalty other than Grant's conclusory statem ent that

he has lost all of his assets. Grant has not submitted tax records or findings of the bankruptcy co urt regarding his financial condition. Without s uch financial records, the Court cannot accurate ly determine that the fine would be too great.

D. Ct. Op. at 19.

Thereafter, Grant filed a motion to amend the judgm ent under Fed. R. Civ. P. 59(e), and included copious f inancial records with that motion. However, the district cou rt, accepting the recommendation of the magistrate judg e, denied that motion because the records had not been submitted previously, and nothing in the record sug gested

that the records had been unavailable when the cour t decided the summary judgment motion. The court stat ed, "[i]ndeed, defendants admit that the evidence was a vailable, but claim that they did not submit it because they were not

on notice that the Court would address both liabili ty and penalty aspects of the case. The record belies this claim." App. at 2. Accordingly, we must address the distric t court's failure to reconsider the fine based upon the addit ional financial information.8 However, before addressing that

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8. Our standard of review for the district court's denial of the appellants' motion to alter or amend a judgment under Fed. R. C iv. P. 59(e) is for an abuse of discretion because the underlying order was an assessment of monetary penalties. See B & W Properties, 38 F.3 d at 368 (citation omitted).

16issue, we will comment upon the process used by the

district court to determine the appropriate amount of the

fine.

Courts usually calculate a fine under the CAA by st arting with the maximum penalty. See, e.g., B & W Investme nt Properties, 38 F.3d at 368 ("[I]n considering fines under the Act, courts generally presume that the maximum pena lty should be imposed."); Tyson Foods, Inc. 897 F.2d 11 28, 1141 ("Upon remand, the district court should first

determine the maximum fine. . . . it must reduce th e fine in accordance with the factors spelled out in [the statute].").9 As noted above, the district court here relied upon our decision in PIRG to state: "courts may start with t he statutory maximum and then consider factors in miti gation of the maximum." D. Ct. Op. at 16. However, althoug h courts may, and frequently do, begin at the maximum , we have never suggested that such a procedure is alway s appropriate. Moreover, our research has not found a ny appellate decision that would suggest that method o f determining a fine under the Clean Air Act is alway s the best way of proceeding.

In PIRG, the district court assessed the maximum pe nalty

allowed under the Act and then reduced that amount based upon some of the mitigating factors. We reversed ba sed upon our conclusion that the district court erred i n mitigating the fine because of the violator's good faith, and the regulatory agency's inaction. We reasoned that, although such a reduction may be appropriate when i t is in the interests of justice, the record before the dis trict court did not support a reduction for the particular viol ator's good faith nor the "nonfeasance" of the regulatory agency. Id. at 80-1. We did not suggest that courts should always begin a fine assessment at the maximum. There will be instances when doing so will initially set the bar so high

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9. Tyson Foods dealt with fines for violations of t he Clean Water Act. However, the Clean Water Act and the Clean Air Act are in pari materia, United States v. Stauffer Chemical Co., 684 F.2d 11 74 (6th Cir. 1982) aff'd, 464 U.S. 165 (1984), and courts often rely u pon interpretations of the Clean Water Act to assist with an analysis unde r the Clean Air Act. See, e.g., Midwest Suspension, 824 F. Supp. at 733.

17that it will remain at a height that is inconsisten t with the

mitigating factors in S 7413(e)(1) even after it is lowered. Here, for example, the fine of nearly $3,000,000 bo re no relationship to the violators' ability to pay. This is contrary to Congress' mandate that courts consider "the econ omic impact of the penalty on the business." 42 U.S.C. S 7413(e)(1). The fine that is imposed must have so me reasonable, and proportionate "nexus" to the violat ions and the violators. See Midwest Suspension, 49 F.3d at 1 204 ("Midwest's argument that the district court did no t establish any nexus whatsoever between the violatio ns claimed and the penalties assessed has no merit."). Such a nexus is implicit in Congress' command that courts include within their mitigation analysis "other factors as justice may require." 42 U.S.C. S 7413(e)(1).

Courts can achieve an equitable mitigation (if any is warranted in a particular case) either by starting at the maximum penalty and mitigating it downward based up on the factors in S 7413(e)(1), or simply relying upon those factors to arrive at an appropriate amount without starting at the maximum. The statute only requires that thef ine be

consistent with a consideration of each of the fact ors the court is obligated to evaluate.

Here, appellants' financial condition was relevant to a determination of the appropriate penalty, and the d istrict court abused its discretion in refusing to consider it. The court justified its refusal for the reasons stated above, however, the court had a legal obligation to consid er each

of the factors set forth in the Act. As noted above , Congress

stated that a court "shall take into consideration" each of

the factors set forth in that Act. 42 U.S.C. S 7413 (e)(1). Here, the court's refusal to consider Grant's bankr uptcy is inconsistent with that mandate. Accordingly, the co urt abused its discretion in refusing to consider appel lants' financial records. See Midwest Suspension, 824 F. S upp. at 735 (rejecting government's request to adopt a rule of law requiring a violator to have "burden of presenting evidence to support a reduction from the statutory maximum penalty" or pay maximum amount).

Dell'Aquilla settled with the government for $400,0 00. The evidence that the appellants attempted to intro duce via

18their Rule 59(e) motion could have (if accepted by the court)

established their utter inability to pay the fine t hat was imposed. That fine was nearly 750% greater than the settlement the government accepted from Dell'Aquill a, the owner of the property.10 We do not mean to suggest that the district court was somehow limited by the governmen t's settlement. It may well be that a court would be ju stified in imposing such a disparate fine because of the polic y considerations that favor settlements as well as th e particular circumstances in a given prosecution und er the CAA. However, the district court should have consid ered appellants' financial records before concluding tha t such a disparity was consistent with its obligation to con sider the mitigating factors set forth in the statute. Since the court failed to consider appellants' financial condition, we will remand for further proceedings consistent with this opinion. At those proceedings, the court will consi der the financial records previously offered by appellants. Since the government may not be able to establish that the th ree visible emissions constituted violations or that Gr ant and Sandalwood are liable for all of the period from Ju ne 29, 1988 to September 14, 1988, the resulting fine may be smaller than the one originally imposed regardless of how the court calculates the fine. However, any fine th at is imposed must be consistent with the command of 42 U.S.C. S 7413(e)(1).

IV.

For the foregoing reasons, we will affirm in part, reverse in part, vacate the court's order as to the penalty , and

remand for further consideration.

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10. In addition, to Grant's financial problems, inc luding bankruptcy,

there is evidence in the record that the economic b enefit gained by Grant and Sandalwood was just $100,000 -- the amount expe nded to the cleanup cost of ACM on the Hoboken property. See Re port and Recommendation of the Magistrate Judge at 6.

19A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

20