Indiana Dept. of Environmental Management v. Conard

• Decision Date: 24 May 1993
• Docket Number: No. 36S01-9305-CV-560,36S01-9305-CV-560
• Citation: 614 N.E.2d 916
• Parties: INDIANA DEPARTMENT OF ENVIRONMENTAL MANAGEMENT and Westinghouse Electric Corporation, Appellants (Respondents Below), v. Dale CONARD and Connie Conard, Appellees (Petitioners Below).
• Court: Indiana Supreme Court

Page 916

614 N.E.2d 916

INDIANA DEPARTMENT OF ENVIRONMENTAL MANAGEMENT and Westinghouse Electric Corporation, Appellants (Respondents Below), v. Dale CONARD and Connie Conard, Appellees (Petitioners Below).

No. 36S01-9305-CV-560.

Supreme Court of Indiana.

May 24, 1993.

David R. Berz, Peter M. Gillon, Steven L. Humphreys, Washington, DC, Joseph B. Carney, James W. Clark, Indianapolis, for appellants.

David S. McCrea, Bloomington, for appellees.

ON CIVIL PETITION TO TRANSFER

SHEPARD, Chief Justice.

The trial court in this case directed Indiana's environmental agency to set aside an effluent permit it has issued pursuant to a federal consent decree that resolved a dispute in Bloomington about discharge of PCBs. We reverse.

The Indiana Department of Environmental Management ("IDEM") granted a National Pollutant Discharge Elimination System ("NPDES") permit to Westinghouse Electric Corporation ("Westinghouse") after public comment and hearings. In general terms, the permit authorizes Westinghouse to discharge water from a facility which treats spring water emanating from a contaminated area known as "Neal's Landfill" in Monroe County so long as the level of polychlorinated biphenyls ("PCBs") in the system effluent does not exceed 1 part per billion ("ppb").

Westinghouse had sought the permit to operate the water treatment facility as required by the terms of a 1985 Consent Decree proposed by the United States, the State of Indiana, Monroe County, the city of Bloomington, and Westinghouse, and approved by the U.S. District Court for the Southern District of Indiana in City of Bloomington v. Westinghouse Elec. Corp., Civil Action No. IP 81-448-C, consolidated with United States v. Westinghouse Elec. Corp., Civil Action No. IP 83-9-C (S.D.Ind.1985). The decree was the product of lengthy settlement negotiations and public hearings and comment at the local, state and federal levels. After the parties approved the Consent Decree and after hearing testimony from the parties and their experts, U.S. District Judge S. Hugh Dillin entered the decree, concluding it was "fair, adequate, reasonable and appropriate ... and that there has been a valid consent thereto by each of the parties mentioned therein." (Record at 62). Judge Dillin simultaneously denied a motion by Dale and Connie Conard to intervene in the suit giving rise to the decree.

As required by the decree, Westinghouse submitted to IDEM an NPDES permit application for the Neal's Landfill water treatment facility. IDEM issued a draft permit, on which public hearings were held and public comment was received. The hearings were designed to obtain public comment on various parameters of the permit such as pH (acidity) levels, total dissolved solids, and sampling requirements, matters which were not specified in the decree.

IDEM thereafter issued Westinghouse an NPDES permit, which included the 1 ppb PCB limit contained in the Consent Decree. The Conards filed objections to issuance of the permit, which objections were heard before an administrative law judge of Indiana's Water Pollution Control Board. The ALJ determined that the Conards' challenge turned solely on whether the IDEM is bound by the Consent Decree's 1 ppb maximum limit on PCBs, or whether its permitting process may establish a more stringent limit. In his Recommended Findings of Fact, Conclusions of Law and Order, the ALJ concluded that the IDEM permitting process was bound by the 1 ppb limitation established in the Consent Decree, and that the Conards' challenge was an impermissible collateral attack on the decree. After a hearing, the Water Pollution Control Board adopted the ALJ's recommended findings and order. The Conards then filed in the Monroe Circuit Court for judicial review of the board's decision.

The trial court reversed the board and granted summary judgment for the Conards. The court held that IDEM is estopped from claiming that the Consent Decree's 1 ppb PCB limit is binding. The court also held that the permitting process is not bound by the terms and limits of the Consent Decree. It ordered IDEM to reopen the NPDES permitting process and reconvene a hearing in Bloomington to explain to the public that the permit is not bound by the Consent Decree, and to solicit additional public comment about the permit. It directed IDEM to rewrite the permit to incorporate the substantive comments and information provided at the hearings. It allowed the operations at Neal's Landfill to go forward, with modifications as necessary if more stringent limitations are dictated by the additional hearing. The Court of Appeals affirmed. Indiana Dep't. of Envlt. Management v. Conard (1992), Ind.App., 589 N.E.2d 1195, modified, 589 N.E.2d at 1200. We grant transfer.

Issues

Westinghouse raised four issues in its appeal from the decision of the trial court:

(1) whether the trial court erred in holding that the Consent Decree does not mandate use of an effluent limit of 1 ppb of PCBs in the NPDES permitting process;

(2) whether the trial court erred in ruling that governmental and private parties to a consent decree may be estopped from arguing that its terms are binding on the basis of extrinsic statements made by governmental officials;

(3) whether the trial court erred in permitting a private party to attack the Consent Decree collaterally; and

(4) whether a private party's challenge to the terms of the Consent Decree is precluded by res judicata.

Standard of Review

As Westinghouse challenges a trial court's reversal of the decision of an administrative agency, we examine at the outset the proper standard for reviewing the agency's decision. We analyze the decision of the trial court in light of our command that trial courts "carefully police the scope of their review so that they do not intrude into the area of valid administrative discretion." Uhlir v. Ritz (1970), 255 Ind. 342, 344, 264 N.E.2d 312, 313.

Under the Administrative Adjudication Act, Ind.Code Ann. Sec. 4-21.5 et seq. (West 1991), the scope of a court's judicial review is limited to consideration of (1) whether there is substantial evidence to support the agency's finding and order and (2) whether the action constitutes an abuse of discretion, is arbitrary, capricious, or in excess of statutory authority as revealed by the uncontradicted facts. Department of Fin. Insts. v. State Bank of Lizton (1969), 253 Ind. 172, 252 N.E.2d 248. In reviewing an administrative decision, a court cannot try the facts de novo or substitute its own judgment for that of the agency. Ind.Code Ann. Sec. 4-21.5-5-11 (West 1991). The party challenging the administrative order bears the burden of showing that there are no substantial facts to support the agency's finding or that the action was arbitrary and capricious and outside the jurisdiction or authority of the agency. Department of Fin. Insts., 253 Ind. at 176, 252 N.E.2d at 251.

The trial court in this case did not accord the decision of the Water Pollution Control Board the deference required under the Administrative Adjudication Act and our caselaw. In its order, the court stated that the Conards' challenge to the binding effect of the decree presented an "issue ... de novo to this Court." (Record at 1945) (Emphasis added). Furthermore, the court did not find the board's order unsupported by substantial evidence or arbitrary and capricious or outside the board's jurisdiction or authority. Instead, the court weighed the facts and evidence de novo to conclude that the IDEM permitting process is not bound by the 1 ppb PCB limit of the Consent Decree and that the State is estopped from asserting otherwise.

As an initial matter, we find the trial court's failure to apply the proper standard of review of the board's decision was error. Next, we turn to the substantive issues raised by Westinghouse.

Is the Consent Decree's PCB Limitation Binding?

The sole issue determined by the ALJ and the Water Pollution Control Board in denying the Conards' objections to the NPDES permit was whether IDEM is bound by the Consent Decree's 1 ppb maximum limit on PCBs. At that stage, the Conards did not contest the fact that the Consent Decree imposes upon Westinghouse a duty to construct a water treatment facility which would reduce the PCB content in the water to a maximum of 1 ppb. ¹ Instead, they argued that IDEM permitting process was not bound by the decree's 1 ppb maximum PCB limit.

The State of Indiana and IDEM became bound by the terms of the Consent Decree when their representatives signed it. The decree was signed for the State of Indiana by Attorney General Linley Pearson and Deputy Attorney General Michael Schaefer, and by the Environmental Management Board (now IDEM) by its technical secretary, Ralph C. Pickard. Paragraph 2 of the decree specifically states: "This Consent Decree shall bind ... all parties hereto and their respective successors and assigns, whether elected or appointed." See also Delaware Valley Citizens' Council for Clean Air v. Pennsylvania, 678 F.2d 470 (3d Cir.) (Pennsylvania bound by consent decree which by its terms applies to state and was signed by state attorney general and counsel for Departments of Transportation and Environmental Resources), cert. denied, 459 U.S. 969, 103 S.Ct. 298, 74 L.Ed.2d 280 (1982).

In signing the Consent Decree, the parties to the decree agreed to impose upon Westinghouse the duty of constructing a water treatment facility which would reduce the concentration of PCBs in the water to a maximum of 1 ppb. As consent judgments are contractual in nature and to be construed as written contracts, cf. United States v. Armour & Co., 402 U.S. 673, 681-82, 91 S.Ct. 1752, 1757-58, 29 L.Ed.2d 256 (1971), we look only to the terms of the decree, which unambiguously establish Westinghouse's duties concerning its treatment facility. Because Westinghouse waived its right to litigate the issues implicated in the Monroe County clean-up project, the conditions upon...