U.S. v. B & W Inv. Properties, 94-1892

• Decision Date: 02 December 1994
• Docket Number: No. 94-1892,94-1892
• Parties: , 63 USLW 2335, 25 Envtl. L. Rep. 20,012 UNITED STATES of America, Plaintiff-Appellee, v. B & W INVESTMENT PROPERTIES and Louis Wolf, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 362

38 F.3d 362

39 ERC 1705, 63 USLW 2335, 25 Envtl.

L. Rep. 20,012

UNITED STATES of America, Plaintiff-Appellee, v. B & W INVESTMENT PROPERTIES and Louis Wolf, Defendants-Appellants.

No. 94-1892.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 7, 1994.

Decided Oct. 24, 1994.

As Amended on Denial of Rehearing

and Suggestion for Rehearing

En Banc Dec. 2, 1994.

Brian R. Havey, Office of U.S. Atty., Civ. Div., Appellate Section, Chicago, IL, William B. Lazarus (argued), Albert M. Ferlo, Dept Robert A. Egan, Egan & Trapp, Chicago, IL (argued), for defendants-appellants.

of Justice, Land & Natural Resources Div., Washington, DC, Linda A. Wawzenski, Asst. U.S. Atty., Chicago, IL, for plaintiff-appellee.

Before CUMMINGS, BAUER and CUDAHY, Circuit Judges.

CUMMINGS, Circuit Judge.

This suit involves a civil action by the United States Environmental Protection Agency (the "EPA") against two defendants for violations of sections 112 and 114 of the Clean Air Act (the "Act"), 42 U.S.C. Secs. 7412(c) and 7414, and the National Emissions Standards for Hazardous Air Pollutants for Asbestos (the asbestos "NESHAP"), 40 C.F.R. Part 61 subpart M. ¹ The United States District Court for the Northern District of Illinois granted summary judgment for the EPA and imposed fines of $1,500,000 and $1,675,000, respectively, on defendants Louis Wolf and B & W Investment Properties, Inc.

Defendants argue on appeal that because the Environmental Protection Agency failed to provide notice before initiating the action, the trial court erred in imposing a statutory penalty; that the court improperly found B & W Investment Properties, Inc. liable; and that the fine was excessive and unsupported in its amount. For the reasons set forth below, the judgment of the district court is affirmed.

STATUTORY BACKGROUND

The Clean Air Act sets forth regulations for the control of air quality, several of which are at issue here. Section 112 of the Act authorizes the EPA to establish national emission standards for any air pollutant deemed "hazardous," for which no ambient air quality standard is applicable. ² Section 112(c) prohibits the construction or modification of existing sources that will emit hazardous air pollutants, and further prohibits emissions of such air pollutants which violate emission standards. Section 114 authorizes the EPA to establish reporting requirements to assist the agency in developing emission standards and monitoring compliance. The asbestos NESHAP, inter alia, requires written notification to the EPA before renovation that could result in emissions and establishes specific standards for the treatment of asbestos--primarily, for purposes of this case, that it be adequately wetted until collected for disposal, so that asbestos particles cannot become airborne. ³ 40 C.F.R. Sec. 61.147. These regulations apply to all owners or operators, defined as "any person who owns, leases, operates, controls or supervises" a property in violation. 40 C.F.R. Sec. 61.141. The Act and asbestos NESHAP impose strict liability on violators.

The EPA is authorized to pursue violations of sections 112 and 114 and the asbestos NESHAP under section 113 of the Act, 42 U.S.C. Sec. 7413. This section sets forth federal enforcement procedures for the issuance of compliance orders and civil actions, and provides for civil penalties not to exceed $25,000 per day of violation.

FACTS

Defendant Louis Wolf purchased the parcel in question, consisting of 5.5 acres and four vacant buildings in Cicero, Illinois, on December 7, 1989. Mr. Wolf made the $575,000 In May 1990, having failed to sell the property, Mr. Berland leased an undeveloped portion of the parcel to David Moss of C & M Parking to use as a storage lot. Mr. Berland signed the agreement with Mr. Moss as an agent for a corporate entity called B & W Investment Properties, Inc. ("B & W"). At the same time, unbeknown to Mr. Wolf, Mr. Berland entered into negotiations with Mr. Moss regarding the eventual sale of the entire parcel for $1,400,000, contingent on the removal of existing asbestos from the vacant buildings.

deal at the behest of fellow real estate developer Albert Berland. In a somewhat Byzantine transaction, Mr. Berland retained a two-year option to purchase the land from Mr. Wolf at a higher rate, and a right of first refusal if Mr. Wolf received other offers. In the meantime, Mr. Wolf authorized Mr. Berland to show the property to potential buyers.

To facilitate the pending sale to Mr. Moss, Mr. Berland hired a contractor to remove the asbestos. Work began on August 10, 1990--unfortunately, without the requisite prior notice to the EPA. Further, the contractor apparently failed to adhere to the safety regulations set forth in the asbestos NESHAP, performing the removal in such a way that friable asbestos could enter the air. This danger was particularly serious because the parcel abutted a Chicago Transit Authority commuter rail stop.

In the meantime, unaware of the asbestos removal work at the site, Mr. Wolf had entered the hospital for treatment of a heart condition in late July or early August 1990. During this time B & W acted as his management company.

On August 27 and 31, following an anonymous tip regarding the renovation activity at the parcel, the EPA ordered a halt to the asbestos removal and sent investigators to the site. These investigators discovered large quantities of unwetted friable asbestos. The investigators also noted that the parcel was not safely secured, that individual buildings had open or broken windows and in one case a hole in the roof, and that no warning signs had been posted to alert individuals to the danger of asbestos exposure.

On August 30, 1990, the EPA issued an order--addressed to B & W Investment Properties but apparently received only by Mr. Berland--regarding asbestos cleanup at the parcel. The order required cessation of the cleanup until the EPA approved a plan for disposal of the previously disturbed asbestos, and required compliance with the Clean Air Act and asbestos NESHAP regarding any further activities. Some time later (the parties differ as to the exact date), Mr. Wolf learned of this order. After further delay, a contractor hired by Mr. Wolf as agent for B & W began EPA-approved cleanup on January 21, 1991; work was complete on March 13-15, 1991.

On September 16, 1991, the EPA filed suit for enforcement and penalties pursuant to 42 U.S.C. Sec. 7413(b), alleging that the defendants had commenced asbestos removal without proper notification to the EPA, and that they had violated the Act and the asbestos NESHAP by failing to wet friable asbestos material adequately. On September 30, 1992, the district court granted summary judgment for the government. On February 17, 1994, following a hearing before the magistrate judge regarding penalties, the district court entered a judgment against Mr. Wolf and B & W. The decision assessed a joint and several fine of $1,675,000 against both defendants for the wetting violations. This sum represented the statutory maximum of $25,000 per day for 67 days, from November 15, 1990 until the approved cleanup began on January 21, 1991. The court reduced Mr. Wolf's liability for the joint and several fine of $1,675,000 to $1,500,000, based on his ability to pay, and imposed no fines on either Mr. Wolf or B & W for the notice violation.

DISCUSSION

I.

Defendants initially contend that the Act requires the EPA to give notice to a violator as a precondition to filing suit. Since neither Mr. Wolf nor B & W was ever properly served with notice (Mr. Berland received the sole written communication from the EPA, and the record is devoid of evidence that he passed it along), defendants submit that the district court erred in granting summary judgment for plaintiff on the liability issue. We review de novo the statutory interpretation behind the district court's decision. Erickson v. Trinity Theatre, Inc., 13 F.3d 1061, 1067 (7th Cir.1994).

A.

In support of their notice argument, defendants rely on section 113(b)(2) of the Act, which states that the EPA may commence suit when any person "violates any requirement of an applicable implementation plan ... more than 30 days after having been notified by the Administrator under subsection (a)(1) of this section of a finding that such person is violating such requirement." 42 U.S.C. Sec. 7413(b)(2). Numerous courts, defendants correctly note, have interpreted this language to incorporate a precondition of notice. See United States v. General Motors Corp., 876 F.2d 1060, 1063 (1st Cir.1989), affirmed, 496 U.S. 530, 110 S.Ct. 2528, 110 L.Ed.2d 480; United States v. Ford Motor Co., 736 F.Supp. 1539, 1547 (W.D.Mo.1990); United States v. Louisiana-Pacific Corp., 682 F.Supp. 1122, 1128 (D.Colo.1987) (all reading the notice of violation provision as mandatory).

However, as plaintiff has pointed out, the EPA did not rely on the enforcement provision of section 113(b)(2). In fact the EPA could not, because section 113(b)(2), which concerns violations of state implementation plans for ambient air quality standards, by its terms does not apply to regulation of hazardous air pollutants. There are no ambient air quality standards for hazardous air pollutants such as asbestos. 42 U.S.C. Sec. 7412 (" 'hazardous air pollutant' means an air pollutant to which no ambient air quality standard is applicable"). Instead, asbestos, like the other hazardous air pollutants designated in section 112, is a federally regulated substance for which apparently no state implementation plan was involved. Id. Section 112(e)(1) of the Act authorizes the EPA Administrator to promulgate work practice standards for pollutants for which there are no feasible emission standards; the asbestos NESHAP constitutes just such a response. Id.

Section 113(b)(3), which vests authority in the EPA to pursue violations of section 112(c), simply states that the EPA may issue compliance...