State ex rel. Miller v. DeCoster

• Decision Date: 22 March 2000
• Docket Number: No. 98-294.,98-294.
• Parties: STATE of Iowa ex rel. Thomas J. MILLER, Attorney General of Iowa, and Iowa Department of Natural Resources, Appellees, v. Austin J. DeCOSTER d/b/a DeCoster Farms of Iowa, Appellant.
• Court: Iowa Supreme Court

608 N.W.2d 785

STATE of Iowa ex rel. Thomas J. MILLER, Attorney General of Iowa, and Iowa Department of Natural Resources, Appellees, v. Austin J. DeCOSTER d/b/a DeCoster Farms of Iowa, Appellant.

No. 98-294.

Supreme Court of Iowa.

March 22, 2000.

William Sidney Smith and Michael P. Mallaney of Smith, Schneider, Stiles, Hudson, Serangeli, Mallaney & Shindler, P.C., Des Moines, for appellant.

Thomas J. Miller, Attorney General, and David R. Sheridan and Michael H. Smith, Assistant Attorneys General, for appellees.

Considered by McGIVERIN, C.J., and CARTER, NEUMAN, and CADY, JJ., and HARRIS,¹ S.J.

NEUMAN, Justice.

This is an environmental enforcement action brought by the State of Iowa against Austin J. DeCoster d/b/a DeCoster Farms of Iowa. The action concerns two hog manure spills at DeCoster confinement facilities, one occurring in Wright County and the other in Hamilton County. Although not major in scope, the violations came on the heels of other administrative actions and legal proceedings against this large-scale livestock producer.

The focus of this appeal by DeCoster is not on the trial court's ultimate finding that the violations occurred and justify the $10,000 penalty ($5,000 per site) stipulated by the parties. Rather, DeCoster contests the method by which the matters came before the court. This case involves "referrals" by the Environmental Protection Commission (hereinafter "EPC" or "commission") to the attorney general pursuant to Iowa Code section 455B.191(4) (1997). A referral is distinguished from violations handled administratively by the EPC, see Iowa Code § 455B.191(1), or initiated directly by the attorney general, see id. § 455B.112, by the fact that referral actions carry greater consequences. A referral that results in a district court judgment and court-imposed penalty may qualify as a "strike" for purposes of classifying a producer with three strikes as an "habitual violator." See id. § 455B.191(7). Once classified as an habitual violator, a producer cannot obtain construction permits for five years and is subjected to greater agency supervision and higher penalties for further violations. Id. § 455B.191(4).

DeCoster claims he has been singled out for harsher treatment because of the size of his operation and publicity surrounding it. Unable to successfully contest the violations on their merits, he has challenged (1) the nature of the action before the Environmental Protection Commission, (2) the membership of that commission, (3) the criteria (or lack thereof) underlying the commission's referral to the attorney general, (4) alleged procedural defects in the commission's action, and (5) the trial court's refusal to permit DeCoster's counsel to examine commission members concerning their referral decision. DeCoster also assails the court's dismissal of his counterclaim for declaratory relief, and the court's finding that the statutes at issue hold the violator strictly liable for waste that is discharged into the state's watercourses.

Finding no merit in any of DeCoster's contentions, we affirm the judgment of the district court.

I. Background Facts and Proceedings.

In early May 1996, employees of the Department of Natural Resources (DNR) discovered liquid hog waste discharging into a drainage ditch in Wright County. The source of the pollution was an old tile line carrying subsurface leakage from the anaerobic lagoon at the DeCoster facility known as Nursery Unit # 3. Sewage fungus growing downstream from the tile indicated a longstanding problem with leakage. Once notified of the problem, DeCoster employees took prompt action to repair the broken tile. Following the DNR discovery at Nursery Unit # 3, then-Governor Terry Branstad declared on a radio talk show that he was going to "shut down" DeCoster Farms. His radio announcement was followed by a press release which stated the governor had directed the DNR to put a hold on new construction permits for DeCoster and to "freeze" any expansion of his facilities. The record reveals that, irrespective of the governor's declaration, the DNR had been without authority for some time to permit expansion of DeCoster facilities because of a pending enforcement action. See Iowa Code § 455B.173.

In July 1996, the incident at Nursery Unit # 3 was brought before the EPC for possible referral to the attorney general for legal proceedings in accordance with Iowa Code section 455B.191(4). On a four-to-four vote, the commission declined to refer the matter for enforcement. A month later EPC administrator, Allan Stokes, placed the matter back on the commission's agenda. In the meantime, two members had resigned from the commission. They were replaced by two new gubernatorial appointees who assumed their responsibilities subject to later confirmation by the Iowa Senate. On reconsideration, the commission voted nine-to-zero to refer the Nursery Unit # 3 violation to the attorney general for judicial enforcement action.

In November 1996, a local farmer reported to a Hamilton County sheriffs deputy that a DeCoster employee was over-applying liquid hog manure on frozen farm ground near a DeCoster facility called Sow Unit # 1. Inspection by DNR officials revealed brownish water with a scum and odor indicative of manure flowing into a ditch along the roadside. DeCoster personnel were at the scene, trying to stop the runoff by roughing up the soil to increase absorption but the soil was too frozen. The employees had been aware of the discharge but continued surface application of the manure.

The incident at Sow Unit # 1 came before the EPC in January 1997. Counsel for DeCoster appeared at the meeting, as he had in connection with Nursery Unit # 3, to argue against referral. The commission voted seven-to-two to refer this violation to the attorney general for judicial enforcement.

The State then filed petitions in district court seeking civil penalties for the violations just described.² In answer to the petitions, which were eventually consolidated, DeCoster responded with a general denial and counterclaim for declaratory judgment. His counterclaim sought a ruling from the court rejecting any notion that the nature of the violations covered by the lawsuit would give rise to an habitual violator classification within the meaning of Iowa Code section 455B.191(7).

The parties thereafter filed cross-motions for partial summary judgment. The district court rejected DeCoster's allegation that the two newest EPC members improperly participated in the referral votes and that the commission, in reconsidering the violation at Nursery Unit # 3, violated its own parliamentary rules of order. The court granted the State's motion for partial summary judgment, finding DeCoster strictly liable for discharging hog waste into waters of the state. It also dismissed, as premature and not within the purview of this action, DeCoster's counterclaim concerning habitual violator status.

The case proceeded to trial on DeCoster's procedural challenges to the EPC referrals. He argued the referrals were the product of discrimination and selective enforcement. From judgment for the State on both violations, DeCoster now appeals.

II. Scope of Review.

This case reaches us on appeal from rulings on the parties' cross-motions for summary judgment, as well as the judgment entered following trial of the remaining issues to the court. The case was tried at law. To the extent the parties' disagreement centers on the court's application of the law to undisputed facts, our review is for the correction of legal error. Goodell v. Humboldt County, 575 N.W.2d 486, 491 (Iowa 1998). Fact findings by the district court are binding on appeal if supported by substantial evidence. Iowa R.App. P. 14(f)(1).

III. Issues on Appeal.

A. "Other agency action" or "contested case proceeding." DeCoster asserts at the outset that the trial court erred when it characterized the proceeding before the EPC as "other agency action," thereby rejecting DeCoster's belated claim of entitlement to a full evidentiary hearing preliminary to referral by the agency to the attorney general for enforcement. The State, mindful that the court rejected DeCoster's argument on the merits, nevertheless insists the issue was waived, and need not have been addressed by the court, because DeCoster failed to raise it before the EPC. The State's waiver argument is correct.

Generally, issues must first be presented to the agency in order to be preserved for appellate review. City of Hampton v. Iowa Civil Rights Comm'n, 554 N.W.2d 532, 534 (Iowa 1996); Fisher v. Board of Optometry Exam'rs, 478 N.W.2d 609, 611 (Iowa 1991); Chauffeurs, Teamsters & Helpers, Local Union No. 238 v. Iowa Civil Rights Comm'n, 394 N.W.2d 375, 382 (Iowa 1986). Although counsel for DeCoster appeared before the commission and argued vigorously against referral, nowhere does the record reflect an attempt to alert that body to the claim to contested case proceedings now being argued.

We have no reason to disagree with the district court's thoughtful analysis concerning the nature of the proceedings before the EPC. It correctly concluded that mere referral by the EPC to the attorney general did not involve an adjudication of the facts in controversy, the hallmark of a contested case proceeding. See Allegre v. Iowa State Bd. of Regents, 349 N.W.2d 112, 114 (Iowa 1984)

. The complaint DeCoster now asserts was simply never raised before the commission and is, accordingly, waived. Our decision on this point applies with equal force to DeCoster's related claims concerning the commission's failure to file findings of fact or conclusions of law, and that its failure resulted in an unreasonable, arbitrary and capricious decision.

B. Referral criteria. The statutory scheme governing enforcement of environmental law violations authorizes the EPC to handle violations administratively (after contested case proceedings) or refer the matter to the attorney...