USA. v. Smithfield Foods

Decision Date26 October 1998
Docket NumberNo. 97-2709,97-2709
Citation191 F.3d 516
Parties(4th Cir. 1999) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. SMITHFIELD FOODS, INCORPORATED; SMITHFIELD PACKING COMPANY, INCORPORATED; GWALTNEY OF SMITHFIELD, LTD., Defendants-Appellants. MICHIGAN CHAMBER OF COMMERCE; PENNSYLVANIA CHAMBER OF BUSINESS AND INDUSTRY; COLORADO ASSOCIATION OF COMMERCE AND INDUSTRY; AMERICAN AUTOMOBILE MANUFACTURERS ASSOCIATION; AMERICAN MEAT INSTITUTE; AMERICAN PETROLEUM INSTITUTE; INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA; INTEGRATED WASTE SERVICES ASSOCIATION; NATIONAL ASSOCIATION OF MANUFACTURERS, Amici Curiae. Argued:
CourtU.S. Court of Appeals — Fourth Circuit

Page 516

191 F.3d 516 (4th Cir. 1999)
UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
SMITHFIELD FOODS, INCORPORATED; SMITHFIELD PACKING COMPANY, INCORPORATED; GWALTNEY OF SMITHFIELD, LTD., Defendants-Appellants.
MICHIGAN CHAMBER OF COMMERCE; PENNSYLVANIA CHAMBER OF BUSINESS AND INDUSTRY; COLORADO ASSOCIATION OF COMMERCE AND INDUSTRY; AMERICAN AUTOMOBILE MANUFACTURERS ASSOCIATION; AMERICAN MEAT INSTITUTE; AMERICAN PETROLEUM INSTITUTE; INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA; INTEGRATED WASTE SERVICES ASSOCIATION; NATIONAL ASSOCIATION OF MANUFACTURERS, Amici Curiae.
No. 97-2709
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
Argued: October 26, 1998
Decided: September 14, 1999

Page 517

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Copyrighted Material Omitted

Page 519

COUNSEL ARGUED: John G. Roberts, Jr., HOGAN & HARTSON, L.L.P., Washington, D.C., for Appellants. Joan M. Pepin, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Patrick M. Raher, James T. Banks, Audrey J. Anderson, Patrick D. Traylor, HOGAN & HARTSON, Washington, D.C.; Anthony F. Troy, James E. Ryan, Jr., James S. Crockett, Jr., MAYS & VALENTINE, L.L.P., Richmond, Virginia, for Appellants. Lois J. Schiffer, Assistant Attorney General, John T. Stahr, Sarah D. Himmelhoch, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Nadine Steinberg, UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Washington, D.C.; Yvette Roundtree, Office of Regional Counsel, Region III, UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Philadelphia, Pennsylvania, for Appellee. Charles E. Barbieri, Lisa J. Gold, FOSTER, SWIFT, COLLINS & SMITH, P.C., Lansing, Michigan; LeRoy S. Zimmerman, Mark D. Bradshaw, ECKERT, SEAMANS, CHERIN & MELLOTT, L.L.C., Harrisburg, Pennsylvania; L. Duane Woodard, BRENMAN, BROMBERG & TENENBAUM, P.C., Denver, Colorado, for Amici Curiae Michigan Chamber of Commerce, et al. Scott M. Duboff, WRIGHT & TALISMAN, P.C., Washington, D.C., for Amici Curiae Automobile Manufacturers, et al.

Before ERVIN and HAMILTON, Circuit Judges, and G. Ross ANDERSON, Jr., United States District Judge for the District of South Carolina, sitting by designation.

Affirmed in part, reversed in part, and remanded with instructions by published opinion. Judge Ervin wrote the opinion, in which Judge Hamilton and Judge Anderson joined.

OPINION

ERVIN, Circuit Judge:

Smithfield Foods, Inc. ("Smithfield") appeals a grant of summary judgment in favor of the United States finding Smithfield liable for multiple Clean Water Act violations. Smithfield also challenges the court's imposition of a corresponding $12.6 million civil penalty.

Smithfield alleges that the court committed two errors with respect to liability. First, Smithfield claims that the district court erred when it found that Orders issued by the Virginia State Water Control Board did not condition, revise, or supercede Smithfield's obligations under its 1992 water discharge permit. Second, Smithfield asserts that the district court erred in its finding that this suit was not (1) precluded by the Supreme Court's holding in Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Foundation, Inc., 484 U.S. 49 (1987), or § 510 of the Clean Water Act ("CWA"), 33 U.S.C.A. § 1370 (West 1986); or (2) barred by § 309 (g)(6)(A)(ii) of the CWA, 33 U.S.C.A. § 1319(g)(6)(A)(ii) (West 1986 & Supp. 1999). On the penalty issue, Smithfield contends that the district court erred in calculating the penalty, especially with respect to its determination of economic benefit and the denial of "good-faith" credit to Smithfield for its compliance efforts.

For the reasons that follow, we affirm the district court's grant of summary judgment on liability. We remand the penalty determination to the district court with instructions to recalculate the civil penalty as directed by this opinion.

Page 520

I.

The facts of this case are undisputed and are comprehensively set out in the district court's published opinion, United States v. Smithfield Foods, Inc., 965 F. Supp. 769, 772-81 (E.D. Va. 1997). To properly analyze this case, however, the major events bear repeating. Smithfield owns and operates two swine slaughtering and processing plants, Smithfield Packing Co. and Gwaltney of Smithfield, Ltd. Both plants are located on the Pagan River, a tributary of the James River, in Isle of Wight County, Virginia. The wastewater discharged from these plants is treated in two of Smithfield's facilities, Outfall 001 and Outfall 002. From at least August 1991 to August 1997, treated wastewater was discharged from Outfall 001 into the Pagan River. From at least August 1991 until June 1996, treated wastewater was discharged from Outfall 002 into the Pagan River. Smithfield stopped discharging wastewater into the Pagan River when it successfully connected its plants to the Hampton Roads Sanitation District ("HRSD") system.

A.

Smithfield's wastewater discharges contained numerous pollutants that were regulated under the CWA and thus, could not be discharged into the waters of the United States unless specifically authorized by permit. Permits are governed by the National Pollutant Discharge Elimination System ("NPDES"), under which polluters obtain an NPDES permit to discharge lawfully certain pollutants in specific amounts. See 33 U.S.C.A. § 1342 (West 1986 & Supp. 1999). Regulation of NPDES permits is overseen by the Environmental Protection Agency ("EPA"), see 33 U.S.C.A. § 1342(a), but locally administered by the Commonwealth of Virginia through its agent, the Virginia State Water Control Board ("the Board"). See 33 U.S.C.A. §§ 1251(b), 1342(b) (West 1986 & Supp. 1999). The Board is authorized to enforce the CWA subject to the guidance and approval of the EPA. See 33 U.S.C.A. § 1319.

Smithfield's discharges were authorized by an NPDES permit ("the Permit") issued in 1986, modified in 1990, and reissued in 1992. The Permit placed restrictions on the amount and concentration of certain pollutants allowed in wastewater released to the Pagan River and required Smithfield to monitor, sample, analyze, and issue reports concerning its discharges. The results of Smithfield's wastewater sampling program were periodically compiled into Discharge Monitoring Reports ("DMRs") and submitted to the Board.

In response to elevated levels of nitrogen and phosphorus in the Chesapeake, the Commonwealth of Virginia promulgated regulations requiring, among other things, that NPDES permits for facilities discharging into nutrient-rich waters like the Pagan River be modified to allow a monthly average phosphorus effluent limitation of 2.0 mg/l. The new regulations represented a considerable reduction in the amount of phosphorus permittees like Smithfield could discharge. To comply, Smithfield would have had to upgrade significantly its wastewater treatment facilities, which the company contended was an insurmountable obstacle under the required deadline. As a result, on June 3, 1988, Smithfield filed suit challenging Virginia's new phosphorus limitation as technologically infeasible.

Notwithstanding the pending legal challenge, the Board reopened Smithfield's Permit on January 4, 1990 and modified it to apply the new, more restrictive phosphorus limitation. The modified Permit ("1990 Permit") also contained a compliance schedule requiring Smithfield to take steps to comply with the new phosphorus limitation within three years of the Permit modification. Smithfield contested this action by appealing the modification. Because these new phosphorus limitations were not required in other states, Smithfield also began to talk publicly about moving

Page 521

its operations out of Virginia rather than complying.

Negotiations between Smithfield and Virginia ensued and to settle the dispute, each of the parties agreed to various accommodations. The agreement was documented in an Order issued by the Board on March 21, 1990 ("the 1990 Order"), in which Smithfield agreed to study the costs and feasibility of solving its wastewater treatment problem by connecting its present wastewater treatment system to the HRSD. In addition, Smithfield pledged to report the results of these studies to the Board by November 13, 1990, by which time Smithfield would decide whether it intended to connect to HRSD or to upgrade its own facilities to comply with the new phosphorus limitations. In return, the Board resolved to defer the commencement of the 1990 Permit compliance schedule until December 1, 1990.

On November 6, 1990, the Board amended the 1990 Order by extending by three months the date by which Smithfield was to report its decision whether to connect to HRSD. The Board also agreed to further defer commencement of the compliance schedule for the new phosphorus limitations.

On May 9, 1991, the Board amended the 1990 Order a second time ("May 1991 Order") granting Smithfield another extension. The May 1991 Order included the following amendments:

(1) Smithfield now had until June 15, 1991 to notify the Board of its commitment to connect to HRSD or upgrade its own facilities to comply with the new phosphorus discharge standard. If Smithfield decided to connect to HRSD, it was required to do so within three months of notification by HRSD that the necessary sewer line was completed and operational. If Smithfield decided not to connect to HRSD, it was required to upgrade its own treatment facilities to comply with all discharge limitations according to the scheduled deadline.

(2) Smithfield had to comply with the interim effluent limitations listed in Appendix A of the May 1991 Order until it connected to HRSD or completed the necessary upgrades to its facilities. Appendix A set out new discharge limitations and monitoring requirements for a pollutant other than phosphorus, but reiterated that required effluent limitations for all other substances remained as listed in the 1990 Permit.

(3) Smithfield was required to dismiss its legal challenge to the...

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