Naturaland Trust v. Dakota Fin. LLC

Decision Date20 July 2022
Docket Number21-1517
Citation41 F.4th 342
Parties NATURALAND TRUST; South Carolina Trout Unlimited; Upstate Forever, Plaintiffs - Appellants, v. DAKOTA FINANCE LLC, d/b/a Arabella Farm ; Ken Smith ; Sharon Smith; Willard R. Lamneck, Jr., Defendants - Appellees. South Carolina Coastal Conservation League; Charleston Waterkeeper, Amici Supporting Appellants. South Carolina Chamber of Commerce, Amicus Supporting Appellee.
CourtU.S. Court of Appeals — Fourth Circuit

ARGUED: Michael George Martinez, SOUTH CAROLINA ENVIRONMENTAL LAW PROJECT, Greenville, South Carolina, for Appellants. Elizabeth Bartlett Partlow, LAW OFFICES OF ELIZABETH B. PARTLOW, LLC, West Columbia, South Carolina, for Appellees. ON BRIEF: Amy Armstrong, Lauren M. Milton, SOUTH CAROLINA ENVIRONMENTAL LAW PROJECT, Georgetown, South Carolina, for Appellants. Adam B. Lambert, ACKER LAMBERT HINTON, P.A., Pickens, South Carolina, for Appellees. Geoffrey R. Gisler, Alex J. Hardee, SOUTHERN ENVIRONMENTAL LAW CENTER, Chapel Hill, North Carolina, for Amici South Carolina Coastal Conservation League and Charleston Waterkeeper. Karen Aldridge Crawford, KLAC LAW LLC, Columbia, South Carolina; Michael S. Traynham, NEXSEN PRUET, LLC, Columbia, South Carolina, for Amicus South Carolina Chamber of Commerce.

Before MOTZ, QUATTLEBAUM, and HEYTENS, Circuit Judges.

Reversed and remanded by published opinion. Judge Heytens wrote the opinion, in which Judge Motz joined. Judge Quattlebaum wrote a dissenting opinion.

TOBY HEYTENS, Circuit Judge:

The Clean Water Act contains a citizen-suit provision allowing adversely affected persons to sue polluters in federal court. 33 U.S.C. § 1365(a)(1). The Act also contains a provision stating that a violation of its requirements "shall not be the subject of a civil penalty action under ... section 1365" if a State "has commenced and is diligently prosecuting an action under a State law comparable to" the federal scheme for assessing civil penalties. § 1319(g)(6)(A)(ii). The main question here is whether a state agency's notice of an alleged violation for failure to obtain a required permit, without more, "commence[s] ... an action" within the meaning of that provision. Because we conclude it does not, we reverse the district court's judgment and remand for further proceedings.

I.

Intending to operate "a working farm with an orchard and vineyard, and later an event barn for weddings and other celebrations," Ken and Sharon Smith formed Arabella Farm, LLC. Farm Br. 2. The farm was built on property purchased by another Smith vehicle called Dakota Finance, LLC, and abutted land owned by the Smiths' son-in-law, Willard Lamneck, Jr. Like the parties, we refer to the Smiths, Lamneck, and the two LLCs collectively as Arabella Farm.

Arabella Farm's site borders South Carolina's Jocassee Gorges area and is bounded by three bodies of water—Clearwater Branch, Peach Orchard Branch, and an unnamed tributary of the Eastatoe River. In 2017, Arabella Farm began clearing 20 acres of land to create its venue. The clearing process dramatically altered the steep, mountainous landscape and exposed the underlying granular soil. Although such an extensive land disturbance ordinarily would require obtaining stormwater permits and adhering to other regulations, see 40 C.F.R. § 122.26(a)(1)(ii), (9)(i)(B), (c)(1), Arabella Farm claimed its work fell within an agricultural exemption to the Clean Water Act's requirements. Before starting work, Arabella Farm did not seek any permits or install sediment or stormwater control measures, which allegedly resulted in significant discharges of sediment-laden stormwater onto nearby property and caused widespread erosion and other detrimental impacts.

Arabella Farm's activities eventually caught the attention of government regulators. In April 2019, the South Carolina Department of Health and Environmental Control (Department) conducted an inspection to evaluate the farm's compliance with the National Pollutant Discharge Elimination System (NPDES) program. The Clean Water Act regulates "point sources" that discharge pollutants and authorizes States to issue NPDES permits for such discharges. 33 U.S.C. § 1342. The permit program is administered through a scheme of cooperative federalism—the Environmental Protection Agency allows South Carolina to administer its own permit program in lieu of the federal one, see § 1342(b) ; 40 Fed. Reg. 28,130 (July 3, 1975), and the Department enforces the State's requirements, see S.C. Code §§ 48-1-10 et seq.

Subsequent site inspections revealed inadequate stormwater controls, significant erosion, and off-site impacts. In August 2019, the Department sent a letter advising Arabella Farm that it was required to obtain an NPDES permit and instructing the farm "to cease and desist any activity at the [s]ite other than the installation and maintenance of storm water, sediment and erosion control measures as directed by its design engineer." JA 57–58. In September 2019, the Department sent the farm a "Notice of Alleged Violation/Notice of Enforcement Conference" and informed the farm of a voluntary "informal" enforcement conference scheduled for the end of that month. JA 54, 58–59. The conference would be "closed to the public and media." JA 59.

In November of the same year, Naturaland Trust and Trout Unlimited—non-profit organizations dedicated to conserving land, water, and natural resources—sent a notice of intent to sue letter to the Smiths, Lamneck, and the registered agent of Dakota Finance. As the statute requires, the letter detailed the alleged violations of the Clean Water Act. See 33 U.S.C. § 1365(b)(1)(A).

EPA regulations also require such notices to include "sufficient information to permit the recipient to identify ... the full name, address, and telephone number of the person giving notice." 40 C.F.R. § 135.3(a). The letter described Trout Unlimited as a "national non-profit" with "two local chapters in the Upstate of South Carolina" and "many members who regularly utilize the Eastatoe River and Little Eastatoe Creek in the vicinity of the [Smiths'] properties," and listed its name and address as: "Trout Unlimited, C/O Greg Placone, P.O. Box 27172, Greenville, S.C[.] 29616." JA 63–64, 76. At the bottom, the letter suggested contacting counselMichael Corley of the South Carolina Environmental Law Project—and provided Corley's address and phone number.

After the required 60-day notice period elapsed, see 33 U.S.C. § 1365(b)(1)(A), Naturaland Trust and South Carolina Trout Unlimited (together, the conservationists) sued Arabella Farm in federal court. JA 21–48.1 The complaint was signed by Michael Corley of the South Carolina Environmental Law Project with the same contact information provided in the notice of intent to sue letter. It identified South Carolina Trout Unlimited as "our state's affiliate of Trout Unlimited, a national non-profit group," and explained that South Carolina Trout Unlimited "has dozens of members who utilize the waters downstream of Defendants' properties"—including the "Eastatoe River and Little Eastatoe Creek""for trout fishing and other recreational opportunities." JA 24–25. The complaint alleged that Arabella Farm's unpermitted land-clearing project violated the Clean Water Act and resulted in various state law torts. As relief, the conservationists sought an injunction and civil penalties to be paid to the United States Treasury under federal law and injunctive relief and damages under state law.

A month after the conservationists filed their complaint, Arabella Farm and the Department entered into a consent order. The order imposed a $6,000 penalty and required the farm to obtain an NPDES permit, submit a stormwater plan and site stabilization plan, and conduct a stream assessment and any recommended remediation.

The district court dismissed the conservationists' complaint. As relevant here, the court concluded that: (1) it lacked subject matter jurisdiction over the conservationists' Clean Water Act claims because the Department had commenced and was diligently prosecuting an action for the same violations; (2) even if the Clean Water Act claims were otherwise valid, South Carolina Trout Unlimited was not a proper party because it failed to correctly identify itself in line with the Act's notice requirements; and (3) having dismissed the federal claims, it would not exercise supplemental jurisdiction over the state law claims.

II.

The district court erred in concluding that the diligent prosecution bar precluded the conservationists' federal claims.

A.

A few introductory words about terminology. The Clean Water Act provides that "any citizen may commence a civil action on his own behalf against any person ... who is alleged to be in violation of an effluent standard or limitation." 33 U.S.C. § 1365(a)(1)(A). The Act further states that "[t]he district courts shall have jurisdiction ... to enforce such an effluent standard or limitation ... and to apply any appropriate civil penalties." § 1365(a). As noted earlier, however, the Act contains a carve-out—which we will call the diligent prosecution bar—providing that a "violation ... shall not be the subject of a civil penalty action under ... section 1365" if "a State has commenced and is diligently prosecuting an action" with respect to that same violation "under a State law comparable" to the federal scheme for assessing civil penalties. § 1319(g)(6)(A)(ii). The Act also includes an analogous provision—which we will call the judicial proceeding bar—that precludes a private action if a State or the EPA is diligently prosecuting a civil or criminal case in court (as opposed to in an administrative proceeding). § 1365(b)(1)(B).

This Court has previously stated that the judicial proceeding bar contained in Section 1365(b)(1)(B) is "an exception to the jurisdiction granted in subsection (a) of § 1365" and affirmed dismissals under Rule 12(b)(1) for lack of subject matter jurisdiction in...

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