Opinion ID: 785944
Heading Depth: 2
Heading Rank: 1

Heading: ALC's Objections to the Penalty Assessment

Text: 36 The assessment of civil penalties for these violations as sought by the United States is governed by 33 U.S.C. § 1319(d). Section 1319(d) provides that the violator of a permit issued pursuant to the Act shall be subject to a civil penalty not to exceed $25,000 per day for each violation. This penalty provision further states that in assessing the penalty, the court shall consider the following factors: 37 the seriousness of the violation or violations, the economic benefit (if any) resulting from the violation, any history of such violations, any good-faith efforts to comply with the applicable requirements, the economic impact of the penalty on the violator, and such other matters as justice may require. 38 Id. The District Court considered each of these factors in connection with the penalty determination. The Court found ALC's violations of the CWA to be serious. It questioned the level of ALC's commitment to the obligations imposed by the Act. It found the economic benefit to ALC to be considerable, primarily in terms of the avoided cost stemming from reduced (inadequate) staffing at its wastewater treatment plants, its delay in a plant upgrade at the Vandergrift facility, and a number of other smaller projects. The Court totaled the economic benefit at $4,122,335, and ultimately doubled it to $8,244,670 as the final penalty. See infra note 6. 39 The imposition of a penalty under § 1319(d) is subject to the exercise of a district court's discretion. See Tull v. United States, 481 U.S. 412, 426-27, 107 S.Ct. 1831, 95 L.Ed.2d 365 (1987). In general, a district court abuses its discretion when it bases its opinion on a clearly erroneous finding of fact, an erroneous legal conclusion, or an improper application of law to fact. LaSalle Nat'l Bank v. First Conn. Holding Group, L.L.C. XXIII, 287 F.3d 279, 288 (3d Cir.2002). 40 Many of the District Court's findings are supported, and unchallenged on appeal. The primary issue contested here relates to economic benefit-i.e. the Court's use of the government's experts' computation of ALC's weighted average cost of capital (WACC) as the interest rate to use to bring the money forward to the penalty judgment date. WACC is defined as the average cost of capital on the firm's existing projects and activities,.... calculated by weighting the cost of each source of funds by its proportion of the total market value of the firm. Stephen A. Ross, Randolph W. Westerfield & Jeffrey Jaffe, Corporate Finance 932 (6th ed.2002). 5 41 ALC asserts that the District Court's economic benefit calculation did not level the playing field, as required by law, but rather imposed a severe penalty. ALC also contends that the District Court's calculations failed to apply other principles required by law, including that (1) expenditures made and included in the economic benefit calculation must relate directly to the violations; (2) the least costly method of compliance should be used in calculating economic benefit; and (3) economic benefit calculations must be based only on periods of non-compliance. We reject the argument that the District Court did not apply the proper legal precepts. Rather the question is the manner of application, and whether the District Court made clearly erroneous fact findings which skewed the calculations to ALC's detriment.