Opinion ID: 612487
Heading Depth: 2
Heading Rank: 3

Heading: Penalties and Fees

Text: Khanjee contends that its relationship to the other defendants in the first appeal, FCP and EnviroPower, is too tenuous to warrant imposing penalties and fees on Khanjee. But Khanjee did not renew this argument on summary judgment after the district court rejected it in denying Khanjee's motion to dismiss. And we already affirmed the district court's grant of summary judgment against all of the defendants in Sierra Club I. See Creek, 144 F.3d at 446 (7th Cir.1998) (matters decided on appeal become the law of the case to be followed on a second appeal unless the prior decision is plainly erroneous). In any event, even if we were to consider Khanjee's contention, it would fail. The citizen suit provision of the Clean Air Act allows any person to bring an action against any person who proposes to construct or constructs any new or modified major emitting facility without a permit. § 7604(a)(3). Khanjee argues that liability can only be imposed on owners or operators. See United Steelworkers of Am. v. Or. Steel Mills, Inc., 322 F.3d 1222, 1229 n. 4 (10th Cir.2003) (While the citizen suit provision does not use the words `owner or operator,' the Clean Air Act has been interpreted to impose `strict liability upon owners and operators' of polluting facilities that violate the Act.) (citing United States v. B & W Inv. Props., 38 F.3d 362, 367 (7th Cir.1994) (discussing asbestos National Emission Standards for Hazardous Air Pollutants, which extends liability beyond nominal owners of a property to all those who lease, operate, control, or supervise a stationary source)). Sierra Club, however, contends that § 7604(a)(3) is not restricted to owners or operators. We need not resolve the dispute. As the district court found, the evidence reflects that Khanjee effectively controlled and led the efforts to build the power plant after the PSD permit expired in early 2003. Khanjee began to serve as the lead developer for the plant's construction in mid 2002. And in March 2003, Khanjee entered into a Development and Purchase Agreement with EnviroPower, which provided that, In consideration of receiving the Development Funding ... [EnviroPower] agrees to cede control over Development of the Projects ... to [Khanjee]. (emphasis added). The agreement further provided for the creation of a Management Committee of three members nominated by Khanjee, which was responsible for... assignment and management of manpower resources, contract negotiations and execution, funding procedures, budget compliance, status reports, schedule compliance and development, [and] implementation and adherence to the Financing Plan. This agreement, which gave Khanjee control over the development of the plant, belies Khanjee's claim that it was a mere financier. The district court also concluded, and we agree, that Khanjee and the other defendants, who are all sophisticated parties, had an intimate working relationship. Khanjee therefore exercised enough control over the project such that it can be held liable as an owner or operator, even if that were the test, along with the other defendants. See B & W Inv. Props., 38 F.3d at 367 (finding that because defendant's name appeared on a lease and on several legal papers, there was no debate that defendant exercised control over the parcel at issue sufficient to bring it within the scope of the owner or operator designation).
The Clean Air Act authorizes suits against entities who construct or propose to construct facilities without a permit. See § 7604(a)(3). When a party prevails under § 7604(a)(3), as Sierra Club did here, the district court is authorized in its discretion to apply any appropriate civil penalty. [4] See § 7604(a) (The district courts shall have jurisdiction ... to apply any appropriate civil penalties (except for actions under paragraph (2) [brought against the Administrator])). The penalty can be a fine for each day defendants violate the Clean Air Act to be deposited in the United States Treasury. § 7413(e). Alternatively, the district court may order a civil penalty of up to $100,000 to be used for beneficial mitigation projects that enhance the public health or environment and are consistent with the Clean Air Act. § 7604(g)(2). In determining the amount of a civil penalty, the district court should consider, in addition to such other factors as justice may require, the size of the violator's business, the economic impact of the penalty on the business, the violator's full compliance history and good faith efforts to comply, the duration of the violation as established by any credible evidence, payment by the violator of penalties previously assessed for the same violation, the economic benefit of noncompliance, and the seriousness of the violation. § 7413(e)(1). The district court's weighing of the statutory factors is reviewed for abuse of discretion. B & W Inv. Props., 38 F.3d at 367-68. Its findings of fact in support of a penalty are reviewed for clear error. Pound v. Airosol Company, Inc., 498 F.3d 1089, 1094 (10th Cir.2007). Courts generally presume that the maximum penalty under the Clean Air Act should be imposed, and then consider the factors described in § 7413(e) to determine what degree of mitigation, if any, is proper. B & W Inv. Props., 38 F.3d at 368; Pound, 498 F.3d at 1095. The district court concluded that the maximum penalty it could award was $41,712,500 for the defendants' continued attempts to build the power plant after the PSD permit expired, [5] but imposed a $100,000 penalty under § 7604(g)(2) after considering the statutory factors. Specifically, the court took into account that the defendants did not profit from the violation and that the defendants had no history of Clean Air Act violations. Khanjee did not provide the court with evidence of the size of its business, of its environmental record, or of the potential economic impact of the proposed penalty. However, the court noted that all of the defendants must be of some financial heft. The court also explained that it was not absolutely clear that the defendants would not violate the Clean Air Act in the future, and that a modest penalty was necessary to forestall future violations. Khanjee finds fault with the district court's analysis because, Khanjee argues, the court erroneously concluded that Khanjee acted with bad faith and relied on that conclusion in imposing a penalty. We agree with Khanjee that in Sierra Club I we rejected Sierra Club's contention that the defendants engaged in willful misconduct by persisting in their proposal to build the plant because the defendants were simply defending the validity of [their] permit in court. 546 F.3d 918, 935-36. But we disagree that the district court disregarded our findings. Rather, as it was required to do under § 7413(e)(1), the court considered as one of many factors whether the defendants made good faith efforts to comply [with the Clean Air Act]. The court found that they did not, stating that the defendants had continued their efforts to construct the power plant even after recognizing that their permit would expire. The court's conclusion is not clearly erroneous. The record does not otherwise reveal that Khanjee made any good faith efforts to comply with the Clean Air Act once the permit expired. Regardless, the Clean Air Act imposes strict liability from the first day of the offense. See B & W Inv. Props., 38 F.3d at 364. We have, however, expressed discomfort with the idea that a penalty may be imposed where a defendant is unaware of a violation. See id. at 368 (explaining that it would seem unfair to charge a defendant the maximum penalty permissible per day for events totally outside his knowledge, because the Clean Air Act's penalty provisions must out of fundamental fairness contain an implied requirement of reasonableness, but finding that the defendant had knowledge of the circumstances surrounding the violation). In this case, we are not confronted with a defendant who lacked knowledge of the circumstances surrounding the violation. The district court found that the evidence reflected an intimate working relationship between the defendants ... regarding the construction of the Plant, and that, [i]t is inconceivable in light of this evidence that Khanjee was not aware of the PSD Permit's expiration in early 2003. As previously noted, the evidence reflects that Khanjee exercised significant control over the project. The court's finding that Khanjee was aware of what was happening with the PSD permit is not clearly erroneous. The district court considered all of the requisite factors under § 7413(e)(1). In light of the size of the project ($600 million) and of the potential maximum penalty of $41.7 million, we agree with the district court that a relatively small penalty of $100,000, imposed jointly and severally on all three defendants, was reasonable. [6]
The district court has discretion to award costs of litigation, including reasonable attorneys' fees, whenever appropriate in a Clean Air Act case. § 7604(d). An award is appropriate if the party seeking fees obtained some success on the merits. See Ruckelshaus v. Sierra Club, 463 U.S. 680, 688, 103 S.Ct. 3274, 77 L.Ed.2d 938 (1983). The court found, and we agree, that Sierra Club prevailed and performed a public service by forcing the defendants to stop construction of their power plant until they have a PSD permit. Khanjee contends that Sierra Club should not get its fees because, it argues, fees should not be awarded to well-funded parties that would bring cases regardless of an award. But there is no support for this proposition in the case law. [Congress], when it called for citizen-suits [to aid enforcement of the Clean Air Act], considered a fee recovery to be consonant with the public interest. Metro. Washington Coal. for Clean Air v. District of Columbia, 639 F.2d 802, 804 (D.C.Cir. 1981). The attorneys' fees provision allows fees to be awarded to any party because Congress wanted to encourage meritorious litigation while discouraging frivolous suits. See Natural Res. Def. Council, Inc. v. E.P.A., 484 F.2d 1331, 1338 n. 7 (1st Cir.1973). And Congress recognized that public interest organizations would conduct a great deal of litigation under the [Clean Air Act]. Id. As we explained, the district court did not abuse its discretion in concluding that Sierra Club was successful on the merits and performed a public service consistent with the Clean Air Act's goals. An award of fees was therefore proper. Western States Petroleum Ass'n v. E.P.A., 87 F.3d 280 (9th Cir.1996), cited by Khanjee, is distinguishable. In that case, the Ninth Circuit described the party that was denied fees as a financially able, nongovernmental party having no more than its own economic interests at stake. Id. at 286. The court also found that the litigation had not served the public interest. Id. Here, Sierra Club did not receive any direct financial benefit from the lawsuit, and it served the public interest. Increased charitable donations are collateral benefits not contemplated by Western States. That Sierra Club may be a well-funded organization does not preclude an award of fees. There is nothing in the Clean Air Act that suggests that fees can only be awarded to indigent parties.