USA v. Alshabkhoun, 01-1380

• Decision Date: 18 January 2002
• Docket Number: No. 01-1380,01-1380
• Citation: 277 F.3d 930
• Parties: (7th Cir. 2002) United States of America, Plaintiff-Appellee, v. Shakeab Alshabkhoun and A&A Farms, Defendants-Appellants
• Court: U.S. Court of Appeals — Seventh Circuit

Page 930

277 F.3d 930 (7th Cir. 2002)

United States of America, Plaintiff-Appellee, v. Shakeab Alshabkhoun and A&A Farms, Defendants-Appellants.

No. 01-1380

In the United States Court of Appeals For the Seventh Circuit

Argued October 31, 2001

Decided January 18, 2002

Appeal from the United States District Court for the Western District of Wisconsin.No. 98-C-583-S--John C. Shabaz, Judge.[Copyrighted Material Omitted]Before Bauer, Coffey and Diane P. Wood, Circuit Judges.

Bauer, Circuit Judge.

The United States and appellantsShakeab Alshabkhoun and A&A Farms (collectively A&A) entered into a court-approved Consent Decree to resolve the government's claims that A&A violated the Clean Water Act.When A&A failed to comply with the terms of the Consent Decree, the government moved to enforce the stipulated penalties provision.The district court granted the government's motion and ordered A&A to pay stipulated penalties and attorney's fees.A&A appealed that ruling.For the reasons set forth below, we affirm the district court.

I.Background

A&A owns 1,000 acres of farmland adjacent to the Wisconsin River in Dane County, Wisconsin.In January of 1994, A&A excavated a drainage ditch system to collect water and excess soil from the farm and neighboring land and convey it to the river.The system required a ditch that was 38 feet wide and 1,500 feet long, which resulted in the discharge of dredged or fill materials into the wetlands.A&A did not obtain a permit from the United States to construct this drainage ditch system.

On December 4, 1996, the Environmental Protection Agency(EPA) issued an administrative compliance order stating that A&A's construction of the ditch without a permit was a violation of the Clean Water Act.The Clean Water Act prohibits the discharge of any pollutant, including dredged or fill material, into navigable waters of the United States, except in accordance with a permit.33 U.S.C. sec. 1311(a).A&A then submitted a restoration plan that the EPA rejected and further attempts to resolve the dispute failed.

On August 13, 1998, the United States filed a civil action in federal district court under section 309 of the Clean Water Act.The court entered partial summary judgment in favor of the government and, on July 2, 1999, the parties entered into a Consent Decree for the restoration of the wetlands.The decree was negotiated by both parties and approved by the district court.It required A&A to pay $225,000 in civil penalties.Further, to properly restore the wetlands, the Consent Decree required A&A to submit to the EPA a Restoration Work Plan, prepared by a certified engineer, and a schedule for completing the tasks set forth in the Plan.

The Consent Decree provided for stipulated penalties for any failure to implement the Plan in compliance with the schedule.Specifically, the Consent Decree required the payment of $500 per day for one to thirty days of noncompliance $1,000 per day for thirty- one to sixty days of noncompliance and $2,000 per day for sixty-one or more days of noncompliance.The Consent Decree allowed for the extension of the deadlines if "performance is prevented or delayed solely by events which constitute a Force Majeure event," defined to exclude "normal precipitation or climate events."A&A was required to notify the government in writing of any alleged Force Majeure event to invoke the extension of deadlines.

The Consent Decree also included a dispute resolution provision.Under this provision, if A&A filed a petition in court concerning the Consent Decree, A&A's penalties would continue to accrue during the proceedings; however, the filing of a petition would stay A&A's obligation to pay any penalty regarding the disputed matter.In the event that A&A did not prevail on the matter in dispute, the stipulated penalties became due.

The Plan required A&A to obtain bids from contractors within thirty days of the approval of the Plan, complete grading and installation of erosion control measures within forty-five days thereafter, and plant the required trees, shrubs and seeds within thirty days after that.A&A hired a contractor and began the work in late November of 1999, but did not complete the project.More than two months later, on February 17, 2000, A&A filed a notice of dispute with the EPA, requesting relief from the Plan on the grounds that compliance was impossible.A&A stated that it had hired additional experts who opined that the implementation of the Plan could potentially cause flooding problems.The EPA reviewed this information and denied A&A relief.

On April 7, 2000, invoking the decree's dispute resolution clause, A&A filed a Petition to Modify the Consent Decree with the district court claiming that significant unforeseen circumstances affected its ability to perform the work.The court rejected A&A's impossibility claim and instead found that since the drainage problem was the very reason A&A constructed the ditch at issue, A&A was well aware of its experts' observations and the potential for drainage problems at the time the Consent Decree was negotiated.As a result, on May 26, 2000, the district court held that A&A had failed to present adequate grounds for any modification of the decree and the petition was denied.

In June of 2000, spring flooding rendered the land unsuitable for work.A&A did complete the required excavation in October of 2000, but the parties were still in dispute over the issue of stipulated penalties for the delay.On October 23, 2000, the government filed a Petition to Enforce the Consent Decree, asking the court for an award of $507,850.40.The amount represented the accumulation of the stipulated daily penalties, as well as attorney's fees.In response, A&A did not contest the calculation of damages, but argued that the stipulated penalties provision was unreasonable and unenforceable and that the delay in completing the work should be excused due to the June flooding.

On January 11, 2001, the district court granted the government's petition in full.The court held that the stipulated penalty provision was reasonable and enforceable because it amounted to less than 10% of the penalty authorized by statute.Further, the court refused to excuse the delay due to the June flooding because had A&A implemented the Plan in a timely manner seven months earlier, the June flooding would have been irrelevant.A&A then brought this appeal.

II.Discussion

Because a consent decree is a form of contract, we generally review a district court's interpretation of the consent decree de novo.Goluba v. Sch. Dist. of Ripon, 45 F.3d 1035, 1037-38(7th Cir.1995).However, where, as here, the district court oversaw and approved the consent decree, we give "some deference" to the district court's interpretation.Id.

A&A concedes that the construction of the ditch violated the Clean Water Act.The sole issue raised on this appeal is whether the district court's enforcement of the Consent Decree is against public policy.A&A presents two arguments: (1) that the stipulated penalty provision in the Consent Decree is void and unenforceable as a matter of public policy because it allows for penalties to accrue while the parties engage in the dispute resolution process; and (2) that the district court erred in penalizing A&A for the delay in compliance with the schedule because it was unable to perform the work due to the June flooding.We find both arguments to be without merit.

A consent decree is a court order that embodies the terms agreed upon by the parties as a compromise to litigation.United States v. Witco Corp., 76 F. Supp. 2d 519, 525(D. Del.1999).For purposes of construction, a judicially approved consent decree is essentially a contract.United States v. City of Northlake, Illinois, 942 F.2d 1164, 1167(7th Cir.1991).While a consent decree is also deemed a judgment of the court, "it is the parties' agreement that serves as the source of the court's authority to enter any judgment at all."Local 93, Int'l Ass'n of Firefighters v. City of Cleveland, 478 U.S. 501, 522(1986);King v....