State ex rel. Environmental Management Com'n v. House of Raeford Farms, Inc., No. 904SC283

• Decision Date: 05 February 1991
• Docket Number: No. 904SC283
• Citation: 400 S.E.2d 107,101 N.C.App. 433
• Court: North Carolina Court of Appeals
• Parties: STATE of North Carolina, ex rel. ENVIRONMENTAL MANAGEMENT COMMISSION and Department of Natural Resources and Community Development, Plaintiff, v. HOUSE OF RAEFORD FARMS, INC., a North Carolina Corporation and Nash Johnson and Sons' Farms, Inc., a North Carolina Corporation, Defendants.

Page 107

400 S.E.2d 107

101 N.C.App. 433

STATE of North Carolina, ex rel. ENVIRONMENTAL MANAGEMENT

COMMISSION and Department of Natural Resources and Community Development, Plaintiff, v. HOUSE OF RAEFORD FARMS, INC., a North Carolina Corporation and Nash Johnson and Sons' Farms, Inc., a North

Carolina Corporation, Defendants.

No. 904SC283.

Court of Appeals of North Carolina.

Feb. 5, 1991.

Attorney General Lacy H. Thornburg by Asst. Atty. Gen. Francis W. Crawley, Raleigh, for plaintiff, appellant-appellee.

Jordan, Price, Wall, Gray & Jones by Henry W. Jones, Jr., and Roseanne P. Carter, Raleigh, for defendants, appellants-appellees.

COZORT, Judge.

Plaintiff Environmental Management Commission is the State agency charged with enforcement of State pollution control laws. In 1988 plaintiff and defendants entered into a Consent Judgment in Duplin County Superior Court for the purpose of settling ten enforcement proceedings then pending against defendants in the superior courts of Duplin and Wake Counties and in the Office of Administrative Hearings. The Consent Judgment provided that Duplin County Superior Court retained jurisdiction of that matter for determining motions for further relief based on changed circumstances. Plaintiff subsequently initiated enforcement proceedings against defendants for 48 alleged violations of the interim effluent limitations provided for in the Consent Judgment. The enforcement proceeding included a notification that $294,000.00 in civil penalties would be assessed against defendants for the alleged violations. Defendants sought relief in the Duplin County Superior Court, obtaining a Judgment and Order which, among other things, set aside the proposed assessment of $294,000.00 in civil penalties. On appeal, we find the trial court erred because defendants failed to exhaust administrative remedies provided under the laws of this State.

We begin with a rather detailed summary of the facts and procedural history of this matter, which is necessary for a complete understanding of the issues raised. Defendant House of Raeford Farms, Inc., (Raeford) and defendant Nash Johnson and Sons' Farms, Inc., (Johnson) which owns 99 percent of the stock of Raeford, are North Carolina corporations which own and operate chicken and turkey hatcheries and chicken slaughtering and processing facilities. Raeford operates a wastewater treatment plant at its Rose Hill Division near Rose Hill, in Duplin County, North Carolina. Raeford's plant consists of two six-acre lagoons in series and a 33-acre spray irrigation field with an underdrain network. The effluent from the underdrain system is collected and discharged into Cabin Branch, which is classified by the Division of Environmental Management as a Class C swamp water in the Cape Fear River basin.

Raeford was issued National Pollutant Discharge Elimination System (NPDES) Permit Number NC0002178 on 1 August 1986 with an expiration date of 31 December 1987. The State issued other permits to defendant, the sum total of which was to regulate the disposal of waste from the several facilities operated by defendants in Duplin County. The State of North Carolina, through plaintiff Environmental Management Commission (EMC), charged defendants with violations of various water pollution and related laws.

This cause began in the posture of a consolidation of the various cases instituted as a result of alleged violations by the defendants of the pollution control laws.

On 29 February 1988, plaintiff EMC and defendants Raeford and Johnson entered into a Consent Judgment to settle ten cases pending in the superior courts of Duplin and Wake Counties and in the Office of Administrative Hearings. The Consent Judgment required, among other things, that the defendants pay civil money penalties in the amount of $100,000.00 and the sum of $4,520.74 in investigation costs (which amounts were paid in full by the defendants) and that other various civil money penalties charged against the defendants for alleged violations of water pollution laws would be remitted over time in conjunction with the defendants' compliance with a comprehensive construction schedule and monitoring and reporting requirements. Defendants agreed to payment of stipulated penalties for failure to meet certain deadlines and requirements, unless the noncompliance was caused by events or circumstances beyond defendants' control. The Consent Judgment concluded with these two paragraphs:

8. All claims, demands and causes of action of the Plaintiff alleged in, or arising out of, or based on matters set forth in Plaintiff's Complaint herein shall be merged in this Consent Judgment and completely settled and discharged by such merger.

9. The Court shall retain necessary jurisdiction of this matter for purposes of enforcing the terms of the Consent Judgment; for purposes of determining any matters in dispute; and for purposes of determining any motion for further relief based on changes of circumstances.

On 14 April 1988, defendant Raeford filed a motion in the cause requesting modification of the Consent Judgment. The Consent Judgment required the submission of a final plan for a wastewater treatment and disposal facility by 1 May 1988. Defendant Raeford had discharged an engineer employed to design this facility. Defendant then determined it would be unable to complete the plans by the deadline in the Consent Judgment. The superior court judge presiding over the case, Judge Henry C. Stevens, III, concluded that defendant Raeford had suffered a change in circumstances as set forth in the Consent Judgment. The court then modified the Consent Judgment to allow Raeford a reasonable time to submit a final plan for the wastewater treatment facility.

On 4 May 1989, defendants filed a second motion in the cause. The defendants presented three claims for relief. First, defendant Johnson stated that it "finds it commercially impractical to complete the construction of the previously anticipated improvements to the old chicken hatchery as permitted on 8 March 1988." The Consent Judgment provided that within 30 days of receipt of the permit, Johnson was to begin construction of the authorized improvements. Johnson's change of plans created a conflict with the Consent Judgment. Johnson wanted to be able to use its old hatchery as it was, i.e., without the required improvements, until its new larger hatchery was ready. Defendant asserted that this change in plans was a change in circumstances justifying a modification of the Consent Judgment's requirement that the defendant construct certain improvements on its present chicken hatchery facility.

Also in this second motion in the cause, Raeford contended that it made a mistake in computing the original interim effluent limitations. Raeford asserted that for this reason it experienced a change in circumstances entitling it to relief from the Consent Judgment in the form of a modification amending the interim effluent limitations established in the attachment to the Consent Judgment.

In the third claim for relief, Raeford sought modification of various filing requirements for the issuance of a nondischarge permit. Raeford claimed that it was unable to submit the additional soil mapping or submit final plans regarding the chicken processing facility as required by the Consent Judgment because the president of Raeford and Johnson had been hospitalized. On 15 May 1989, the defendants modified this claim for relief alleging that on 12 May 1989, they had complied with the submission requirements.

On 18 May 1989, defendants filed a second amendment to their motion in the cause asserting a fourth claim for relief. Through this amendment defendants notified the court that the plaintiff had notified them that defendants were being assessed civil penalties of $294,449.20 for failure to comply with deadlines and requirements set forth in the Consent Judgment. In this second amendment, the defendants asked the court to modify the effluent limitations provided for under the Consent Judgment, apply these modified limitations retroactively and find that the defendants have at all times complied with the effluent limitations, thus removing the justification for the proposed civil penalties. The defendants also asked for attorneys' fees.

The fines to which the defendants objected were assessed by plaintiff in a letter dated 12 May 1989. Plaintiff notified defendant that it was being assessed a penalty of $288,000.00 for 48 violations of N.C.Gen.Stat. § 143-215.1(a)(6) and NPDES Permit No. NC 0002178; $6,000.00 for one violation of N.C.Gen.Stat. § 143-215.1(a)(2) and NPDES Permit No. NC 0002178; and $449.20 for investigation costs. In the notice sent to defendants, the plaintiff informed defendants of three options: (1) pay the penalty; (2) submit a request for mitigation; or (3) submit a request for an administrative hearing. Plaintiff informed defendants they had 60 days to respond.

On 19 May 1989, defendants' motion for amendments to the Consent Judgment was heard in Duplin County Superior Court by Judge Stevens. In an order filed 5 June 1989, the court found that the parties had resolved the issues involved in the first claim for relief. The court determined that it had jurisdiction over the issues and matters in controversy raised by the plaintiff in its 12 May penalty assessment notice to defendants without defendants proceeding through the administrative process pursuant to N.C. Gen.Stat. § 150B-23 et seq., including jurisdiction over the civil penalties assessed for violations of the terms of the NPDES permit. The court's order set less stringent effluent limits. The court stated: "[T]his interim order is entered in the exercise of the courts [sic ] equitable jurisdiction ... the same being an inherent power of the Superior Court to maintain the status quo ... and specifically to discourage the 'stockpiling' of repetitive litigation." Judge Stevens also...