U.S. v. Anthony Dell'Aquilla, Enterprises and Subsidiaries, 96-5761

• Decision Date: 05 August 1998
• Docket Number: No. 96-5761,96-5761
• Citation: 150 F.3d 329
• Parties: , 28 Envtl. L. Rep. 21,525 UNITED STATES of America v. ANTHONY DELL'AQUILLA, ENTERPRISES AND SUBSIDIARIES; Harry Grant; Sandalwood Construction Corporation, Harry Grant, Sandalwood Construction Corporation, Appellants.
• Court: U.S. Court of Appeals — Third Circuit

Page 329

150 F.3d 329

47 ERC 1080, 28 Envtl. L. Rep. 21,525

UNITED STATES of America v. ANTHONY DELL'AQUILLA, ENTERPRISES AND SUBSIDIARIES; Harry

Grant; Sandalwood Construction Corporation,

Harry Grant, Sandalwood Construction Corporation, Appellants.

No. 96-5761.

United States Court of Appeals, Third Circuit.

Argued Oct. 30, 1997.

Decided Aug. 5, 1998.

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

Faith S. Hochberg, United States Attorney, Peter G. O'Malley, Assistant United States Attorney, Susan Handler-Menahem (Argued), Assistant United States Attorney, Newark, NJ, for Appellee.

Before: NYGAARD, McKEE and WEIS, Circuit Judges.

McKEE, Circuit Judge.

We are asked to review the district court's grant of summary judgment in favor of the United States and against Harry Grant and Sandalwood Corporation. The court ruled that Grant and Sandalwood were liable for violations of the Clean Air Act, 42 U.S.C. § 7401 et seq., ("CAA"), and the National Emission Standard for Hazardous Air Pollutants established for asbestos, 40 C.F.R. pt. 61, subpt. M. ("NESHAP"), as a matter of law, and assessed penalties against Grant and Sandalwood in the amount of $2,975,000 under 42 U.S.C. § 7413(b). That sum represents the maximum fine for each violation for each day the violation existed.

We will affirm the grant of summary judgment in favor of the United States based upon Grant's and Sandalwood's non-compliance with an EPA compliance order for each 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 that were charged, we will vacate that portion of the district court's order that is based upon those three violations, and remand for further proceedings consistent with this opinion. We also conclude that there is a genuine issue of material fact as to whether Grant and Sandalwood functioned as operators under the CAA until September 14, 1988. Finally, we hold that the district court erred in calculating the fine Grant and Sandalwood must pay. Therefore, on remand, the United States must establish 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 undisputed that Anthony Dell'Aquilla is the owner of this property. On May 5, 1988, Dell'Aquilla and Grant entered into an Agreement to Form Joint Venture ("Agreement") to develop the Hoboken property. Under the terms of the Agreement, 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 to the environmental condition of the property. It provided that, in the event that any hazardous environmental condition was discovered on the property, Dell'Aquilla would cure the condition at his own expense and indemnify Grant against 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 provided him with copies of correspondence from contractors certifying that the property and buildings on the property had been inspected and were free of asbestos. Id. at 539. The Agreement further provided that Grant would receive a joint ownership interest in the property contingent upon refinancing. However, the refinancing was never finalized, and Grant also learned that Dell'Aquilla could not convey clear title so Grant never obtained an ownership interest under the Agreement.

Grant invested time and money developing the Hoboken property in his role as project manager. He and his wife were the majority shareholders in Sandalwood. Sandalwood's responsibilities included hiring engineers and architects to develop the Hoboken property, and contracting for the demolition of the buildings already on the property and removal of the resulting debris. Id. at 164 & 229. Grant also incorporated Grant Marina Urban Renewal Corporation 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 the demolition as required by law. App. at 483. While there, Inspector Fitzpatrick observed insulation that appeared to be asbestos containing material ("ACM") covering several pipes in one of the demolished buildings. He also noticed that the debris from the demolition appeared to contain ACM. Id. at 21-22. His observations were corroborated when subsequent tests performed upon samples taken from the area established they contained asbestos.

Fitzpatrick returned to the Hoboken property several times during the summer of 1988. During these visits, he witnessed numerous violations of state and federal environmental laws. The violations included the continued unauthorized demolition of ACM structures, visible emissions of ACM dust, improper removal of ACM, and inadequate wetting of the ACM which allowed particles to become airborne. On June 29, 1988, the EPA issued a compliance order under § 112 of the CAA in which it commanded Dell'Aquilla, Grant and Sandalwood to comply with all federal asbestos regulations. However, despite 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 government 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 the regulations because they were not "owners or operators" of the Hoboken property. See 40 C.F.R. § 61.02. The district court held that they were "operators", and found them 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 reconsider the amount of the penalty because it concluded that Grant had initially failed to submit evidence of his finances. This appeal followed.

Grant and Sandalwood argue that: (1) there are genuine issues of material fact concerning their status as "owners or operators" of the Hoboken property, (2) the government failed to make a prima facie case for each of the 119 violations alleged, and (3) the district court abused its discretion in failing to reconsider the $2,975,000 penalty in light of Grant's financial situation. We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. ²

II.

The CAA was enacted, in part, "to protect and enhance the quality of the Nation's air resources." 42 U.S.C. § 7401(b)(1). In order to meet this objective, Congress authorized the EPA to establish emission standards for enumerated hazardous air pollutants. 42 U.S.C. § 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 contains asbestos, and for the disposal of asbestos. A violation of this NESHAP constitutes a violation of the CAA. See 42 U.S.C. § 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'Aquilla and/or his agents led them to believe that any asbestos on the property had properly been removed and all necessary 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 person who owns, leases, operates, controls, or supervises a stationary source." 40 C.F.R. 61.02. A stationary source is "any structure, facility, or installation which emits any air pollutant which has been designated as hazardous by the Administrator." Id. Grant and Sandalwood concede that the property is a "stationary source" and only challenge 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 ownership interest. In addition, as mentioned above, the contemplated conveyance of an ownership interest under the Agreement never occurred because Dell'Aquilla could not convey clear title. Accordingly, Dell'Aquilla remained the sole owner of the property. However, it is now axiomatic that a non-owner can still be liable as an "operator." Moreover, our determination of whether one is an operator or owner under the CAA must be conducted in a manner consistent with the broad reach of the statute. See, e.g., United States v. Tzavah Urban Renewal Corp., 696 F.Supp. 1013, 1021 (D.N.J.1988) (" '[O]wner or operator' is defined broadly for purposes of asbestos regulations.").

Here, the district court relied in part upon United States v. Walsh, 783 F.Supp. 546 (W.D.Wash.1991...