State v. Harenda Enterprises, Inc.

Decision Date13 March 2008
Docket NumberNo. 2005AP1829.,2005AP1829.
Citation2008 WI 16,746 N.W.2d 25
PartiesSTATE of Wisconsin, Plaintiff-Respondent-Petitioner, v. HARENDA ENTERPRISES, INC., Defendant-Appellant.
CourtWisconsin Supreme Court

For the plaintiff-respondent-petitioner there was oral argument by Jeffrey M. Gabrysiak, Assistant Attorney General, with whom on the briefs was also J.B. Van Hollen, Attorney General.

For the defendant-appellant there was a brief by Mark W. Rattan and Litchfield Cavo, Brookfield, and oral argument by Mark W. Rattan.

¶ 1 ANN WALSH BRADLEY, J

The petitioner, State of Wisconsin, seeks review of a published court of appeals decision reversing a circuit court judgment in favor of the State and imposing civil penalties and surcharges on Harenda Enterprises, Inc. (Harenda).1 The judgment and sanctions imposed were for violations of Wis. Admin. Code Ch. NR 447 in connection with Harenda's contract to inspect the Milwaukee Auditorium for possible asbestos-containing material (ACM).

¶ 2 The case centers on the question of the proper method for testing whether material constitutes asbestos-containing material under Wis. Admin. Code § NR 447.022 and 40 C.F.R. Pt. 763, Subpt. E., App. E, § 1.7.2.1. The State asserts that the court of appeals erred in concluding that the rule prescribing the method of testing clearly requires the averaging of the test results. It contends that the rule is ambiguous and that we should give deference to the clarifications of the rule issued by the United States Environmental Protection Agency (EPA), which explain that each layer of a multi-layer sample must be tested. It maintains that under the rule, ACM is present if a single layer of the sample contains greater than one percent asbestos.

¶ 3 Harenda argues that the State's interpretation is inconsistent with the plain language of the rule, which requires averaging of the test results. It maintains that the clarifications issued by the EPA are inconsistent with § 1.7.2.1 and should therefore be accorded no deference. Harenda further argues that the clarifications outlining the single layer test method constitute impermissible rule making. Finally, it argues that the State's enforcement action violates its substantive due process rights.

¶ 4 We determine, first, that the language of § 1.7.2.1 is ambiguous. Giving deference to an agency's interpretation of its own rule, we conclude that the EPA's interpretation is controlling because it is neither inconsistent with § 1.7.2.1 nor clearly erroneous. We further determine that the clarifications do not constitute impermissible rule making; rather, they are valid interpretive rules. Finally, we determine that the circuit court's judgment does not violate Harenda's substantive due process rights. We therefore reverse the court of appeals.

I
A

¶ 5 To better understand the issues presented, it is helpful to examine the regulatory framework. We begin with a brief summary of the federal and state regulations at play in this case.

¶ 6 Under the federal Clean Air Act, the United States Environmental Protection Agency (EPA) is authorized to publish a list of hazardous air pollutants and to establish national emission standards (National Emission Standards for Hazardous Air Pollutants, or "NESHAPs") for each pollutant on the list. 42 U.S.C. § 7412; United States v. American National Can Co., 126 F.Supp.2d 521, 523 (N.D.Ill.2000). Asbestos was one of the first pollutants designated as hazardous under the Clean Air Act. National Can, 126 F.Supp.2d at 523.

¶ 7 The original asbestos NESHAP was published in 1973, and included standards governing removal of asbestos prior to building demolition. 38 Fed.Reg. 8,820 (1973). In 1975, the asbestos NESHAP was expanded to address the handling of asbestos during building renovations. 40 Fed.Reg. 48,293 (1975); National Can, 126 F.Supp.2d at 523. The current asbestos NESHAP, which was published in 1990, is found at 40 C.F.R. § 61.140 et seq.

¶ 8 The Wisconsin Department of Natural Resources (DNR) is authorized by the Wisconsin Statutes to promulgate rules implementing clean air standards consistent with chapter 285 of the Wisconsin Statutes and the federal Clean Air Act. Wis. Admin. Code § NR 447.01(2);3 Wis. Stat. §§ 285.11, 285.13, 285.17, 285.27.4 Pursuant to this authority, the DNR promulgated rules concerning asbestos inspection, identification, and abatement. These rules are set forth in chapter NR 447 of the Wisconsin Administrative Code.

¶ 9 Chapter NR 447 is patterned after the federal NESHAP standards. See note to Wis. Admin. Code § NR 447.01. Most importantly with respect to the present matter, chapter 447 has adopted measures requiring owners and operators to inspect facilities prior to demolition or renovation. Wis. Admin. Code § NR 447.06(1). If such an inspection reveals enough asbestos, the notification and abatement requirements of sections NR 447.07 and 447.08 apply to each owner or operator. Wis. Admin. Code § NR 447.06(2). Violations of the regulations are strict liability offenses. United States v. B & W Inv. Properties, 38 F.3d 362, 367 (7th Cir.1994).

¶ 10 As discussed more fully below in Part III A, the regulations define ACM as material that contains "more than 1% asbestos as determined using the method specified in Appendix E to Subpart E, 40 C.F.R. part 763, section 1, Polarized Light Microscopy...." Wis. Admin. Code § NR 447.02(1)(a). The regulations describing the proper way to analyze a multi-layered sample include the following instructions: "When discrete strata are identified, each is treated as a separate material so that fibers are first identified and quantified in that layer only, and then the results for each layer are combined to yield an estimate of asbestos content for the whole sample." 40 C.F.R. Pt. 763, Subpt. E, App. E, § 1.7.2.1. Wisconsin adopted both the definition and the instructions describing the method of analysis. Wis. Admin. Code § NR 447.02; Wis. Admin. Code § NR 484.04(28)(July 2007).

¶ 11 The text of the instructions, however, quickly became a source of confusion. On two occasions the EPA issued notices of clarification to address how multi-layered samples are to be analyzed. 59 Fed. Reg. 542 (Jan. 5, 1994); 60 Fed.Reg. 65,243 (Dec. 19, 1995).

¶ 12 The December 1995 clarification explained that § 1.7.2.1 continued EPA's past policy that separate layers in multi-layered systems were to be analyzed separately, such that "no averaging or dilution by combining layers of asbestos-containing material with nonasbestos-containing material was allowed." 60 Fed.Reg. 65,243 (Dec. 19, 1995).

¶ 13 The clarification allowed that a source sending a multi-layered sample to a laboratory for testing may request that certain samples first be composited for analysis in an effort to reduce time and the costs associated with the sample. It advised that when the composite analysis indicates that the average of the sample's layers is greater than one percent, the sample is deemed to be ACM and an individual analysis of the layers is not necessary. However, when the composited sample analysis results in less than one percent asbestos, but greater than zero, an "analysis by layers is required to ensure that no layer in the system contains greater than one percent asbestos." Id.

¶ 14 Pursuant to its regulatory authority the DNR initiated an enforcement action against Harenda. In this case we examine whether we owe deference to an agency's interpretation of its own rule concerning the testing of multi-layered samples for asbestos content.

B

¶ 15 The background facts of this case are not in dispute. The circuit court set forth those facts in its Findings of Fact and Conclusions of Law entered along with its order granting judgment in the State's favor.

¶ 16 This case stems from a decision by the Wisconsin Center District to renovate the Milwaukee Auditorium. In 2001, the Wisconsin Center District retained Harenda to conduct an inspection of the Auditorium for possible ACM prior to renovation. Among the areas Harenda inspected were the walls of the Auditorium's second floor bowl area (the "disputed area"). As part of its pre-demolition inspection, Harenda took samples from the disputed area and sent them to a testing laboratory. The test results indicated that none of the samples contained greater than one percent asbestos.

¶ 17 The demolition of the disputed area, which was carried out by a contractor, commenced in March 2002 and proceeded without following chapter NR 447 asbestos abatement regulations. After demolition had started, representatives of the State took samples from the walls of the disputed area for testing. The laboratory that tested the samples found a layer in a multi-layered sample that contained greater than one percent asbestos. Demolition ceased, and the State collected three further samples from the disputed area. The tests on these samples showed that the samples each contained greater than one percent asbestos.

¶ 18 Two days later, the State collected ten samples of plaster material from the disputed area that had been demolished. It provided a "split" of each of these samples to Harenda. The laboratory found that four of the State's ten samples were multi-layered samples containing a single layer of material with one percent asbestos or more, but with an overall asbestos content of less than one percent.

¶ 19 Harenda sent its split samples to an independent laboratory for testing. The laboratory found five of the ten samples were multi-layered samples containing a single layer of two percent asbestos and one layer of material that was a non-detect for asbestos. In contrast to the laboratory used by the State, Harenda's laboratory did not obtain an overall asbestos content for the five multi-layered asbestos-containing samples.5

¶ 20 The State, upon the request of the DNR, filed a complaint against Harenda. Based on the tests of its samples from the disputed area, the...

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