Pound v. Airosol Company, Inc.

• Decision Date: 20 August 2007
• Docket Number: No. 06-3299.,06-3299.
• Citation: 498 F.3d 1089
• Parties: Robert J. POUND; Pro Products, Inc., Plaintiffs-Appellants, v. AIROSOL COMPANY, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

498 F.3d 1089

Robert J. POUND; Pro Products, Inc., Plaintiffs-Appellants, v. AIROSOL COMPANY, INC., Defendant-Appellee.

No. 06-3299.

United States Court of Appeals, Tenth Circuit.

August 20, 2007.

Brett E. Nelson, (Gregory M. Gotwald with him on the briefs), Plews Shadley Racher & Braun, Indianapolis, IN, for Plaintiff-Appellant.

Paul S. Penticuff, (John W. Cowden with him on the brief), Baker, Sterchi, Cowden & Rice, L.L.C., Overland Park, KS, for Defendant-Appellee.

Before BRISCOE, EBEL, and HARTZ, Circuit Judges.

BRISCOE, Circuit Judge.

In this citizen-suit action, Plaintiffs-Appellants Robert Pound and Pro Products, Inc. (collectively "Pro Products") challenge an order of the district court declining to impose a monetary penalty against Defendant-Appellee Airosol Company, Inc. (Airosol) for violations of the Clean Air Act (CAA, or "the Act"). Pro Products also challenges the district court's order denying its request for attorney fees and costs. We exercise jurisdiction pursuant to 28 U.S.C. § 1291, and REVERSE and REMAND for further proceedings.

I

Pro Products sells habitat control products for exotic animals, primarily reptiles. One such product is Provent-a-Mite, an insecticide used to control mites and ticks on reptiles. By early 2002, Pound, the owner of Pro Products, learned that certain reptile dealers and reptile product suppliers were marketing a pesticide labeled Black Knight for use in eradicating reptile parasites. Dealers and suppliers were marketing Black Knight for this use despite the fact that Black Knight was not registered or approved for the treatment of pests affecting reptiles.

Black Knight, a pesticide manufactured by Airosol, is registered under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) for treatment of various household pests. Black Knight is an aerosol product containing hydrochlorofluorocarbons (HCFCs) 22 and 142 (monochlorodifluoromethane and monochlorodifluoroethane, respectively), Class II substances as defined and regulated by § 602(b) of the CAA, 42 U.S.C. § 7671a(b). As of February 10, 1993, Airosol manufactured and sold the identical product, registered under Environmental Protection Agency (EPA) Registration No. 901-82, under three different labels: Black Knight, Airosol Aircraft Insecticide, and Government Insecticide.

The 1990 Amendments to the CAA included provisions to phase out the use of ozone-depleting substances such as those contained in Black Knight, and provided that, unless a manufacturer has applied prior to January 1, 1994, for an exception or exemption for reformulation as set forth by statute or regulation, "[e]ffective January 1, 1994, it shall be unlawful for any person to sell or distribute, or offer for sale or distribution in interstate commerce . . . any aerosol product or other pressurized dispenser which contains a Class II substance. . . ." 42 U.S.C. § 7671i(d)(1)(A); see also 40 C.F.R. § 82.65(b), (c) (setting forth procedure to apply for temporary extension). Thus, Class II substances, such as those contained in Black Knight, are banned by the CAA, although the distribution or sale of products containing banned substances is permitted for an additional period if a reformulation exemption is first obtained.

On December 18, 2002, Pro Products brought suit against Airosol under the citizen suit provision of the CAA, 42 U.S.C. § 7604(a)(1). Pro Products sued Airosol, alleging, in pertinent part, that Airosol was in violation of § 7671i(d)(1)(A) of the CAA. On March 10, 2004, the district court granted Pro Products' motion for partial summary judgment finding, as a matter of law, that Airosol's manufacture, sale, and distribution of Black Knight violated § 7671i(d)(1)(A) of the CAA.¹ Following a bench trial, the district court entered an order on July 18, 2006, declining to penalize Airosol for its CAA violations. The court cited other factors, but relied heavily on its conclusion that Pro Products' suit was brought to remove a competitor from the market and not out of a concern for the environment. The court also denied Pro Products' renewed request for attorney fees and costs noting a circuit split, and no guidance from this court, on whether an award of attorney fees is appropriate "when the prevailing party brought the suit for personal financial gain rather than to further the purpose of the Clean Air Act." Appx. at 545. Pro Products now challenges the district court's decision not to penalize Airosol for violating the Act, and also the district court's denial of its request for attorney fees and costs.

II

A. CAA Penalty Analysis

We will uphold a district court's findings of fact in support of a CAA penalty unless the findings are clearly erroneous. See Pub. Interest Research Group of New Jersey, Inc. v. Powell Duffryn Terminals, Inc., 913 F.2d 64, 79 (3d Cir.1990), cert. denied, 498 U.S. 1109, 111 S.Ct. 1018, 112 L.Ed.2d 1100 (1991).² The district court's weighing of those facts, and its penalty determination, are reviewed for abuse of discretion. See United States v. Dell'Aquilla, 150 F.3d 329, 338 (3d Cir. 1998). However, we "review de novo the statutory interpretation behind the district court's decision." United States v. B & W Inv. Props., 38 F.3d 362, 366 (7th Cir.1994) (reviewing a Clean Air Act citizen suit). Specifically, our review of the district court's "legal construction" of the Clean Air Act's penalty factors "is plenary." United States v. Allegheny Ludlum Corp., 366 F.3d 164, 171 (3d Cir.2004).

Section 7604(a) of the CAA provides the district court with authority to "enforce such an emission standard or limitation, or such an order . . . and to apply any appropriate civil penalties. . . ." 42 U.S.C. § 7604(a). Section 7413(e)(1) sets forth the factors that a court "shall" take into consideration in determining the penalty, if any, to be assessed for a violation of the Act:

In determining the amount of any penalty to be assessed under this section or section 7604(a) of this title, the Administrator or the court, as appropriate, shall take into consideration (in addition to such other factors as justice may require) the size of the 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 (including evidence other than the applicable test method), payment by the violator of penalties previously assessed for the same violation, the economic benefit of noncompliance, and the seriousness of the violation.

42 U.S.C. § 7413(e)(1).³

"In considering fines under the Act, courts generally presume that the maximum penalty should be imposed." United States v. B & W Inv. Props., 38 F.3d at 368; see also Dell'Aquilla, 150 F.3d at 339 ("Courts usually calculate a fine under the CAA by starting with the maximum penalty."). When starting with the maximum penalty, courts then consider the factors described in 42 U.S.C. § 7413(e) to determine what degree of mitigation, if any, is proper. See Dell'Aquilla, 150 F.3d at 339; see also United States v. Marine Shale Processors, 81 F.3d 1329, 1337 (5th Cir.1996) ("[W]hen imposing penalties under the environmental laws, courts often begin by calculating the maximum possible penalty, then reducing that penalty only if mitigating circumstances are found to exist."). This is not to say that this methodology must be used, but merely that we agree with the persuasive case law that concludes that this approach is satisfactory. Dell'Aquilla, 150 F.3d at 338 ("[A]lthough courts may, and frequently do, begin at the maximum, we have never suggested that such a procedure is always appropriate."). Other courts, for example, use a "bottom up" approach whereby the economic benefit a violator gained by noncompliance is established and then adjusted upward or downward, rather than a "top down" approach in which the maximum possible penalty is first established, then reduced following an examination of "mitigating" factors. See United States v. Mun. Auth. of Union Twp., 150 F.3d 259, 265 (3d Cir.1998) (collecting cases in a CWA case).

Here, the district court calculated the maximum possible penalty under the CAA, then mitigated that penalty to zero based on the following findings: (1) a penalty greater than $20,000 would bankrupt Airosol, (2) Pro Products never established that Airosol's violations of the Act were intentional, (3) Airosol had not been previously penalized for similar violations, (4) Airosol voluntarily ceased manufacturing and selling Black Knight and will no longer benefit from its violations, (5) the EPA neither cited Airosol nor elected to become involved in the case, (6) Airosol's violations of the CAA were not a serious threat to the environment, and (7) "most importantly," Pro Products' purpose in bringing suit was to remove a competitor rather than a genuine concern for the environment. Appx. at 543-4.

Pro Products makes four arguments in support of its contention that the district court abused its discretion in concluding that it was not appropriate to penalize Airosol for its violations of the CAA. First, Pro Products argues that the district court relied on improper factors not listed in § 7413(e)(1). Second, it argues that the district court failed to address required factors enumerated in § 7413(e)(1). Third, it argues that the factors relied on by the district court do not support a complete mitigation of penalty. Last, it argues the district court did not consider certain evidence supporting the imposition of a penalty.

1. Consideration of Improper Factors

Pro Products argues that the district court relied on three improper factors in mitigating Airosol's penalty to zero. We agree. Specifically, the district court first implied that mitigation is proper where "a private citizen [rather than the EPA] brought suit against [a defendant] for its Clean Air Act violations." Appx. at 544. The district...