United States v. Reserve Mining Co.

• Decision Date: 04 May 1976
• Docket Number: No. 5-72-Civil-19.,5-72-Civil-19.
• Citation: 412 F. Supp. 705
• Parties: UNITED STATES of America, Plaintiff, The State of Michigan et al., Plaintiffs-Intervenors, State of Minnesota and Minnesota Pollution Control Agency, Plaintiffs, v. RESERVE MINING COMPANY et al., Defendants, Northeastern Minnesota Development Association et al., Defendants-Intervenors.
• Court: U.S. District Court — District of Minnesota

412 F. Supp. 705

UNITED STATES of America, Plaintiff The State of Michigan et al., Plaintiffs-Intervenors State of Minnesota and Minnesota Pollution Control Agency, Plaintiffs, v. RESERVE MINING COMPANY et al., Defendants Northeastern Minnesota Development Association et al., Defendants-Intervenors.

No. 5-72-Civil-19.

United States District Court, D. Minnesota, Fifth Division.

May 4, 1976.

John E. Varnum, Washington, D. C., for plaintiff United States.

Michael Ferring, St. Paul, Minn., for United States Army Corps of Engineers.

Byron E. Starns, Philip Olfelt, Paul Faraci and James Schoessler, St. Paul, Minn., for plaintiff State of Minnesota.

William P. Dinan, Robert Asleson, Daniel Berglund, Duluth, Minn., for plaintiff City of Duluth.

Howard Vogel, Minneapolis, Minn., for plaintiffs Minnesota Environmental Law Institute, Inc., Northern Environmental Council, Save Lake Superior Ass'n, Michigan Environmental Student Confederation, Inc., and Environmental Defense Fund, Inc.

Edward Fride, Duluth, Minn., and Maclay Hyde, Minneapolis, Minn., for defendant Reserve Mining Co.

William Egan, Minneapolis, Minn., for defendant Republic Steel Co.

John Gordon and G. Allen Cunningham, Minneapolis, Minn., for defendant Armco Steel Co.

Wayne G. Johnson, Silver Bay, Minn., for defendants Village of Beaver Bay, Silver Bay Chamber of Commerce, Village of Silver Bay, Town of Beaver Bay, Lax Lake Property Owners Ass'n.

ORDER

1. ASSESSING PENALTIES,

2. IMPOSING SANCTIONS

and

3. REIMBURSING CLEAN WATER EXPENSE

DEVITT, Chief Judge.

Plaintiff Minnesota seeks an order imposing penalties on defendants for violation of state pollution control laws and regulations and, with other plaintiffs, moves for an order assessing litigation costs against Reserve Mining Company as a sanction for claimed violations of discovery rules, court orders and other misconduct.

These issues were first presented to the trial court, the Honorable Miles W. Lord presiding, in 1974 but were never adjudicated. Recently these motions were refiled and the parties have submitted legal memoranda detailing their respective positions. Although the principal issue in this lawsuit—that Reserve's discharges into the air and water violate state and federal law, create a potential health hazard and consequently should be enjoined — has already been decided, Reserve Mining Co. v. Environmental Protection Agency, 514 F.2d 492 (8th Cir. 1975), these secondary issues remain.

Based on all the files and records, the court concludes that: 1. assessment of penalties is not authorized or appropriate for violations specifically urged by Minnesota; 2. Reserve's violation of the terms of its state permits, which authorize discharges of production wastes into Lake Superior, calls for penalties for each day of violation; 3. Reserve's bad faith in the conduct of the defense of this lawsuit and its failure to truthfully and fully comply with discovery requests and court orders justify sanctions by way of imposition of a portion of plaintiffs' litigation expenses on defendants. We also determine that the city of Duluth is entitled to be reimbursed by defendants for interim clean water expense.

MINNESOTA'S CLAIMS FOR PENALTIES

It has been established that Reserve has violated Minnesota's pollution control laws and regulations. Reserve Mining Co. v. Environmental Protection Agency, 514 F.2d 492, 523-24, 527-29 and 532, n. 78 (8th Cir. 1975); United States v. Reserve Mining Co., 394 F.Supp. 233, 242-45; 380 F.Supp. 11, 56 (D.Minn.1974). Minn.Stat. § 115.071 subd. 3 (1974) authorizes a court to impose a fine of up to $10,000 per day for each violation of, inter alia, the laws and regulations violated by Reserve. Minnesota contends that defendants should be fined for daily violations of these laws and regulations for almost a full year.¹

Reserve's violation of state pollution laws and regulations break down into three categories:

1. violations of regulation WPC 15, water quality and purity standards;

2. violation of air quality regulations and other pollution control requirements;

3. violations of state discharge permits.

The violations in each of these categories will be examined to determine whether penalties under Minn.Stat. § 115.071 subd. 3 (1974) are justified.

Because Reserve, from the outset, has challenged the validity and applicability of WPC 15, imposition of penalties for the many violations of this regulation is not justified.² Reserve appealed the final order of the Minnesota Pollution Control Agency (PCA) which implemented WPC 15 to the district court of Lake County in December of 1969. Although that court upheld WPC 15, it decided that WPC 15(a)(4), the anti-degradation clause, did not apply to Reserve and that WPC 15(c)(6), the secondary treatment and effluent limitation clause, was arbitrary and unreasonable in its application to Reserve. On appeal by the PCA, the Minnesota Supreme Court affirmed in part and reversed in part and remanded the matter to the district court with instructions to send the case back to the PCA for further proceedings. Reserve Mining Co. v. Minnesota Pollution Control Agency, 294 Minn. 300, 200 N.W.2d 142 (1972). These proceedings were held in abeyance by the PCA pending resolution of this lawsuit. United States v. Reserve Mining Co., (D.Minn. 5-72-Civ-19, unpublished memorandum and order of April 16, 1973.)³

Because Reserve mounted substantial, continuous legal challenges to WPC 15, the law does not authorize imposition of penalties for violations in the first category. Wadley S. Ry. v. Georgia, 235 U.S. 651, 35 S.Ct. 214, 59 L.Ed. 405 (1915), United States v. Pacific Coast European Conference, 451 F.2d 712 (9th Cir. 1971). See also Duquesne Light Co. v. Environmental Protection Agency, 481 F.2d 1 (3d Cir. 1973). Cf. Train v. Natural Resources Defense Council, 421 U.S. 60, 95 S.Ct. 1470, 43 L.Ed.2d 731 (1975), Getty Oil Co. v. Ruckelshaus, 467 F.2d 349 (3rd Cir. 1972), cert. denied, 409 U.S. 1125, 93 S.Ct. 937, 35 L.Ed.2d 256 (1973).

Although previous opinions in this case indicate that Reserve, from time to time, has violated other pollution control laws and regulations, the findings of fact and conclusions of law do not support imposition of penalties for violations in the second category. The findings were made in the context of plaintiffs' request for injunctive relief, the primary remedy sought in this lawsuit, and therefore do not indicate the nature and time of each violation or whether the state was damaged. The claim that each of the violations in the second category occurred daily is not supported by the record. It also should be observed that some of these violations, although not insignificant, are of a lesser magnitude — not the kind of acts which normally justify imposition of penalties.

The third category of violations, the daily dumping of approximately 67,000 tons of carcinogenic waste into Lake Superior polluting public water supplies in violation of its state discharge permits is, by far, Reserve's most serious offense. Despite this, Minnesota questions its authority, based on the present state of the record, to claim penalties under the statute for Reserve's violations of state discharge permits. Oral argument, April 15, 1976, Tr. at 46 et seq. However, Minnesota's complaint as amended does allege violations of Reserve's state discharge permits and asks for civil penalties for all unlawful discharges. The trial court's findings of fact and conclusions of law establish without question that Reserve violated its state permits. United States v. Reserve Mining Company, 380 F.Supp. 11, 58 (D.Minn.1974).

In 1947 Reserve obtained from two state agencies, identical permits authorizing it to discharge tailings into Lake Superior. Subsection (d) of those permits prohibits discharges which

result in any material clouding or discoloration of the water at the surface outside of the specified discharge zone . . . nor shall such tailings be discharged so as to result in any material adverse effects on . . . public water supplies . . ..

The district court concluded that "the terms of the permits are being violated" because

the discharge causes discoloration of the surface water outside of the zone of discharge, causes an increase in turbidity, and adversely affects the public water supplies of several communities resulting in unlawful pollution of the lake. Id. at 59.

The court of appeals agreed, stating that:

The record shows that Reserve is discharging a substance into Lake Superior waters which under an acceptable but unproved medical theory may be considered as carcinogenic. This discharge gives rise to reasonable medical concern over the public health. Reserve Mining Co. v. Environmental Protection Agency, 514 F.2d 492, 529 (8th Cir. 1975).

Clearly, these findings justify the conclusion that Reserve violated its discharge permits.⁴ The trial court has determined that Reserve was in violation of its state discharge permits every day during the May 20, 1973 to April 20, 1974 period. United States v. Reserve Mining Co., 380 F.Supp. 11, 48 (D.Minn.1974).

Minn.Stat. § 115.45 (1974) requires Reserve to comply with the terms of its state permits or be subject to the penalties authorized by Minn.Stat. § 115.071 subd. 3 (1974). Therefore, because Reserve has violated its permits, the only remaining issue is the amount of the penalty.

In making this determination, the court is aware that, as a result of these discharges, defendants are liable for the costs, expected to be approximately six million dollars, of supplying clean water to the affected communities. In addition, the injunction resulting from this litigation will compel Reserve to either cease operations or expend substantial sums, estimated at over three hundred million dollars, to develop an alternative means of disposing of production wastes.

It is not disputed that Reserve, by supplying needed jobs and services, has revitalized the economy of...