U.S. v. Dearborn Ref. Co., Civil Action No. 09–CV–13597.

Citation777 F.Supp.2d 1077
Decision Date31 March 2011
Docket NumberCivil Action No. 09–CV–13597.
PartiesUNITED STATES of America, Plaintiff,v.DEARBORN REFINING COMPANY and Aram Moloian, Defendants.
CourtUnited States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)

OPINION TEXT STARTS HERE

Jacqueline M. Hotz, United States Attorney's Office, Detroit, MI, for Plaintiff.Jeffrey K. Haynes, Keith C. Jablonski, Beier Howlett, Bloomfield Hills, MI, for Defendants.

OPINION AND ORDER DENYING DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS OR, ALTERNATIVELY, FOR SUMMARY JUDGMENT

MARK A. GOLDSMITH, District Judge.

I. INTRODUCTION

This is an action brought by the United States pursuant to the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. § 6901 et seq., and the Federal Debt Collection Procedures Act (“FDCPA”), 28 U.S.C. § 3001 et seq., to collect a civil monetary penalty imposed by the United States Environmental Protection Agency (“EPA”). Defendants are Dearborn Refining Company (DRC), the corporate entity on which the civil monetary penalty was imposed, and its president and majority shareholder, Aram Moloian.

Now before the Court is Defendants' motion for judgment on the pleadings or, alternatively, for summary judgment, based on the statute of limitations. The parties agree that the five-year limitations period under 28 U.S.C. § 2462 is applicable to this action, but disagree regarding when the period began to run. This matter is fully briefed and the Court heard oral argument on January 20, 2011. For the reasons that follow, Defendants' motion will be denied.

II. BACKGROUND 1

DRC operates a virgin-blending and used-oil facility in Detroit, Michigan. On September 28, 2001, after an investigation, the EPA filed an administrative complaint against DRC alleging violations of RCRA and its implementing regulations for the management of used oil and hazardous waste. Civil administrative penalty proceedings were commenced before an administrative law judge (“ALJ”), who issued a 74–page Initial Decision (attached as Exhibit A to the Complaint) finding DRC to be in violation of RCRA. Pursuant to 42 U.S.C. § 6928(a), the ALJ imposed a $1.25 million civil penalty against DRC and ordered it to comply with certain requirements delineated in the “Compliance Order” section of the decision.

DRC timely appealed the ALJ's Initial Decision to the Environmental Appeal Board (“EAB”), which issued a Final Order (attached as Exhibit B to the Complaint) on September 10, 2004, affirming the Initial Decision of the ALJ in its entirety, including the ALJ's decision to assess a $1.25 million civil penalty against DRC. Significantly, the EAB's Final Order required DRC to

pay the full amount of the civil penalty [$1.25 million] within thirty (30) days after the filing of this Final Order, unless, prior to that, [DRC] and the Region negotiate an arrangement pursuant to which [DRC] will pay the penalty in more than one installment, in which case payment shall be made pursuant to the negotiated payment schedule.

Compl. at Ex. B, p. 6 (footnote omitted).

With regard to the Final Order, the parties agree that it: (1) was issued and filed by the clerk of the EAB on September 10, 2004, as the date stamp on the first page of the order reflects; (2) was received by the EPA's regional hearing clerk four days later, on September 14, 2004, as reflected by the second date stamp found on the first page of the order; 2 and (3) by its express terms, affords DRC 30 days from September 10, 2004—until October 10, 2004—to either pay the penalty or negotiate an installment plan arrangement.

The parties further agree that the applicable statute of limitations governing the timeliness of the present action is five years. See 28 U.S.C. § 2462. The Government commenced the present action on September 11, 2009—five years and one day after the filing of the EAB's Final Order on September 10, 2004, and four years, eleven months, and one day after October 10, 2004, DRC's deadline under the EAB's Final Order for either paying the penalty or negotiating an installment plan arrangement. Thus, if the five-year limitations period started on September 10, 2004, as Defendants contend, this action is time-barred. If the five-year period started a month later, on October 10, 2004, as the Government contends, the action is timely. The sole question for determination is on which of these dates the Government's claim “first accrued” under § 2462.

III. ANALYSIS

The parties agree, as does the Court, that the five-year statute of limitations, codified at 28 U.S.C. § 2462, applies in this case. See Sec. & Exch. Comm'n v. Mohn, 465 F.3d 647, 653 (6th Cir.2006) (section 2462 “applies to government actions to enforce administratively assessed penalties”). Section 2462 provides, in pertinent part:

[A]n action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued if, within the same period, the offender or the property is found within the United States in order that proper service may be made thereon.

The parties disagree on when the present claim “first accrued.” The Government argues that this action is timely because its claim against Defendants first accrued, for purposes of § 2462, on October 10, 2004, the date on which DRC became noncompliant with the EAB's Final Order:

[DRC's] violation of the terms of the Final Order, by failing to pay the penalty or negotiate an installment payment agreement within 30 days of the entry of the Final Order, was the last act that gave rise to the United States' ability to file suit in the District Court.

Gov't Resp. at 9–10. In support of its argument, the Government relies mainly on three cases, all discussed below.

Defendants, on the other hand, argue that the Government's claim first accrued on September 10, 2004, the date on which the Final Order affirming the imposition of the penalty was issued and filed. In support of their argument, Defendants rely mainly upon the decision in Mohn, wherein the Sixth Circuit determined that “a claim accrues and the period of limitations begins to run on any collection proceeding to which § 2462 applies once the underlying administrative action establishing liability becomes final.” See 465 F.3d at 654.

Courts have used different verbal formulations in discussing the accrual of a claim for purposes of the statute of limitations. The Supreme Court has stated that claims accrue when there is a “right to demand payment.” Crown Coat Front Co. v. United States, 386 U.S. 503, 513–514, 87 S.Ct. 1177, 18 L.Ed.2d 256 (1967). See also Mohn, 465 F.3d at 654 ([a] cause of action ‘accrues' when a suit may be maintained thereon”); United States Dep't of Labor v. Old Ben Coal Co., 676 F.2d 259, 261 (7th Cir.1982) ([a] statute of limitations cannot begin to run until there is a right to bring an action”). While differing in phrasing, these formulations all share the view that a claim cannot accrue until all elements necessary for the pleading of the claim have transpired.

Thus, the date triggering the clock under § 2462 is the earliest date on which the Government could have brought the present enforcement action, i.e., the date on which all the elements of this enforcement action were in existence and could have been asserted in a pleading. In the present case, the precise question becomes: Could the Government have brought this case immediately upon the issuance of the EAB's Final Order on September 10, 2004, or did it have to wait until the due date for payment had passed without payment by Defendants? For the reasons that follow, the Court concludes that Defendants' position cannot be sustained, and that the limitations period began running on October 10, 2004, the date on which the amount owing to the Government became delinquent.

The question whether the Government could have brought suit on September 10, 2004 is answered most directly by reviewing the EAB Final Order itself. It provided for a 30–day period during which the parties could negotiate a payment plan and expressly deferred any payment obligation until October 10, 2004. Given that the Government had to wait at least 30 days to receive payment, it would be inconsistent with the language of the Order to conclude that, on September 10, 2004, the Government could have initiated court proceedings, insisting that it had a “right to demand payment.” Crown Coat Front, 386 U.S. at 513–514, 87 S.Ct. 1177.

Of course, the Government had the right to payment in the future in the event of default. But such a right to future payment if there were a delinquency is no different than the right a mortgage lender has to future payment if a borrower defaults. And just as a mortgage lender has no “right to demand payment” by filing a lawsuit prior to a delinquency, so too the Government had no such right prior to delinquency. To hold otherwise would mean, in the case of a mortgage lender, that the statute of limitations would start to run on the day the mortgage note was signed, rather than on the day the borrower defaults. The untenability of the result in that circumstance applies with equal force in our case.

Another insurmountable barrier to the Government's filing of a suit prior to delinquency would have been an inability to satisfy standing requirements. Without proper standing under Article III of the Constitution, a plaintiff cannot invoke federal court jurisdiction. See Kardules v. City of Columbus, 95 F.3d 1335, 1347 (6th Cir.1996) (standing required for federal court jurisdiction). Standing requires three elements:

First and foremost, there must be alleged (and ultimately proved) an injury in fact—a harm suffered by the plaintiff that is concrete and actual or imminent, not conjectural or hypothetical. Second, there must be causation—a fairly traceable connection between the plaintiff's injury and the complained-of conduct of the defendant. And...

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