Friends of Milwaukee v. Milwaukee Metro

In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 03-3809

FRIENDS OF MILWAUKEE’S RIVERS and

LAKE MICHIGAN FEDERATION,

Plaintiffs-Appellants,

v.

MILWAUKEE METROPOLITAN SEWERAGE

DISTRICT,

Defendant-Appellee.

____________

Appeal from the United States District Court

for the Eastern District of Wisconsin.

No. 02-C-0270 — Charles N. Clevert, Jr., Judge.

____________

ARGUED MARCH 29, 2004—DECIDED SEPTEMBER 2, 2004

____________

Before CUDAHY, ROVNER and DIANE P. WOOD, Circuit

Judges.

CUDAHY, Circuit Judge. For decades, the defendant

Milwaukee Metropolitan Sewerage District (MMSD) and its

predecessor organization have, for various reasons, occa-

sionally discharged untreated sewage directly into Lake

Michigan and Milwaukee’s rivers. The discharges were re-

duced in number and volume after MMSD’s system’s capacity

was expanded by the Deep Tunnel, which was completed in

1994. However, discharges from sanitary sewers (which

2 No. 03-3809

violate the Clean Water Act and MMSD’s discharge permit)

have persisted despite expectations that the Deep Tunnel

would virtually eliminate them.

The plaintiffs, Friends of Milwaukee’s Rivers and the

Lake Michigan Federation (collectively, the plaintiffs), per-

ceived a lack of action by the State of Wisconsin and MMSD

to eliminate these persistent sanitary sewer discharges. In

2001, the plaintiffs filed a notice of intent to bring a citi-

zens’ suit under the Federal Water Pollution Control Act

(the Clean Water Act or the Act), 33 U.S.C. §§ 1251 et seq.,

and in the early hours of March 15, 2002, they brought suit

in federal court. The State of Wisconsin also filed suit later

on the same day in Milwaukee County court, and within a

few months, it reached a settlement with MMSD. The

centerpiece of the consent agreement resulting from the

Milwaukee County action provided for additional expendi-

tures of more than $900 million on several projects to

further increase the capacity of MMSD’s sewer system.

MMSD subsequently moved to dismiss the plaintiffs’ fed-

eral suit as barred because the State of Wisconsin had

taken judicial and administrative enforcement actions to

diligently prosecute its violations of the Act. The district

court, finding that the State of Wisconsin had indeed dili-

gently prosecuted the violations alleged by the plaintiffs,

dismissed for lack of subject matter jurisdiction because the

suit was barred by the terms of the Clean Water Act. In the

alternative, the district court found that the plaintiffs’ suit

would be barred by res judicata. The plaintiffs appeal both

of these findings, and for the reasons that follow, we

reverse.

I. Background

MMSD is a state-chartered government agency providing

wastewater services to 28 municipalities in southeast

Wisconsin. MMSD’s 420-square-mile service area includes

No. 03-3809 3

all cities and villages within Milwaukee County (except the

City of South Milwaukee), and all or part of 10 munici-

palities or sanitary districts in the surrounding counties of

Ozaukee, Washington, Waukesha and Racine. Two types of

municipality-owned sewer systems feed into MMSD’s

interceptor sewers: separate sewers and combined sewers.

Separate sewers have separate pipes for storm water (which

empties directly into area waterways) and sanitary waste

(which empties into MMSD’s system where it can be

treated). Combined sewers, which are mostly older sewer

systems, are designed to carry both storm water and sani-

tary waste in the same pipes.1 MMSD’s discharge permit

1

There are advantages and disadvantages to combined sewer

systems. The disadvantages were dramatically illustrated during

the month of May 2004, when heavy rainfall resulted in the dumping

of “an unprecedented 4.6 billion gallons of raw sewage” directly

into Lake Michigan and Milwaukee area streams and rivers. Marie

Rohde and Steve Schultze, Sewage Dumped in May: 4.6 Billion

Gallons, MILWAUKEE J. SENTINEL, May 29, 2004, at 1A (emphasis

added). The State accused MMSD of multiple violations for the

portion of the 4.6 billion gallons attributable to separated sewers

carrying only sanitary waste, which accounted for 500 million

gallons. See Steve Schultze and Marie Rohde, Sewerage District

Denies Blame, MILWAUKEE J. SENTINEL, July 3, 2004, at 1B. The

remaining 4.1 billion gallons were attributable to discharges from

combined sewer systems. Wisconsin’s Department of Natural

Resources has recently referred MMSD (along with 29 southeast-

ern Wisconsin communities) to Wisconsin’s Department of Justice

for possible civil litigation. See Larry Sandler, DNR Calls for

Legal Action in MMSD Dumps, MILWAUKEE J. SENTINEL, August

3, 2004, at 1B.

The advantages of combined sewer systems may be less obvious

but should still be mentioned. In MMSD’s combined sewer system,

the often highly-contaminated runoff from most rainstorms and

snowstorms is captured in the system and treated before being

discharged. This allows Lake Michigan to be spared from “vast

(continued...)

4 No. 03-3809

prohibits overflows from separate sanitary sewers except in

very limited situations, though up to six discharge events are

allowed annually from combined sewers as long as Lake

Michigan’s water quality does not suffer. (MMSD’s Supp.

Appx. at 142.)

Nearly thirty years ago, the State of Wisconsin (State)2

entered into a stipulation (1977 Stipulation) with the pre-

decessor organization of the defendant, MMSD. This stipu-

lation resolved litigation that had commenced in 1976 in

the Dane County Circuit Court over violations of MMSD’s

1

(...continued)

amounts of road salt, heavy metals, oil and grease” in all but the

heaviest storms. George Meyer, Separating Sewers Won’t Do the Job,

MILWAUKEE J. SENTINEL, June 20, 2004, at 3J. Discharges from

combined sewers are also diluted with storm water, which is

estimated by WisDNR to make up 90% of overflows, while

discharges from separated sewers involve undiluted sewage. See

id.; Lee Bergquist, Lake Can Take Some Pollution, But Experts

Still Worry About Overflows, Runoff, MILWAUKEE J. SENTINEL,

July 12, 2004, at 1A.

2

Wisconsin has a “stepped” enforcement process that begins with

meetings between the Department of Natural Resources

(WisDNR) and the violator or with the issuance of a warning let-

ter (Notice of Non-Compliance). (Plaintiffs’ Supp. Appx. at 278.)

If the conditions causing the violation are not resolved, WisDNR

can issue a formal notice of violation. Id. If the violator does not

take corrective action, WisDNR refers the matter to the Wisconsin

Department of Justice (WisDOJ) to initiate judicial action with

which WisDNR remains involved. (MMSD’s Br. at 39.) For ease of

reference, when discussing judicial and administrative actions

taken by Wisconsin state agencies against entities that violate the

Act, we will refer to the Wisconsin Department of Natural

Resources (WisDNR), the Wisconsin Attorney General and the

Wisconsin Department of Justice (WisDOJ) generically as “the

State.” In other contexts and as necessary, the agencies will be

referred to individually.

No. 03-3809 5

Wisconsin Pollutant Discharge Elimination System (WPDES)

permit. The 1977 Stipulation acknowledged more than 60

historic violations of MMSD’s WPDES permit and the

Federal Water Pollution Control Act (the Clean Water Act

or the Act), 33 U.S.C. §§ 1251 et seq., but it did not require

MMSD to pay any penalties or fines. Instead, MMSD was

required to spend nearly $2 billion over the following 20

years on improvements to several woefully substandard as-

pects of MMSD’s sewage treatment system. The main im-

provement was a “Deep Tunnel,” which came on line in

1994. The Deep Tunnel increased the system’s capacity by

allowing up to 405 million gallons of untreated sewage to be

temporarily stored during periods of heavy rain and then

pumped back into MMSD’s treatment facilities and treated

before being discharged. Heavy rainfall taxes the system’s

capacity due to Milwaukee’s combined sewers as well as

improperly connected downspouts/drainage and leaks in the

system that allow runoff and ground water to infiltrate.

Although the Deep Tunnel undeniably has reduced the

number and volume of both sanitary sewer overflows

(SSOs) and combined sewer overflows (CSOs), it has not

fulfilled its intended goal of virtually eliminating SSOs.

(Plaintiffs’ Sep. Appx. at 211.) Contrary to expectations,

there have been an average of 4.9 SSOs and 3.0 CSOs an-

nually since the Deep Tunnel went into effect (some of which

were not related to the Deep Tunnel), resulting in discharges

by MMSD totaling 936.7 million gallons and 12.3 billion

gallons respectively since 1994 (as of a 2002 audit). Id. at

212.

The plaintiffs grew concerned about these continuing

discharges and the State’s apparent lack of enforcement

action. On July 11, 2001, they sent to MMSD the required

notice of intent to bring a citizens’ suit under the Clean

Water Act for violations of MMSD’s discharge permit that

had occurred after the Deep Tunnel came on line, with

copies to all necessary state and federal agencies. (Plaintiffs’

6 No. 03-3809

Sep. Appx. at 105-09.) Five days later, the State notified

MMSD that several of the SSOs identified in the plaintiffs’

letter were violations of MMSD’s WPDES permit and the

Act. One day prior to the expiration of the 60-day notice

period prescribed by the Act, the State and MMSD filed a

stipulation (2001 Stipulation) with the Dane County Circuit

Court as part of the 1976 litigation. Neither the plaintiffs

nor the public were provided any opportunity to comment

on the 2001 Stipulation prior to its filing. The 2001 Stipulation

required MMSD, at an estimated total cost of $907 million,

to complete three new deep tunnel projects (increasing storage

capacity by an additional 116 million gallons, or 30%), to

complete all activities contemplated by the approved 2010

Facilities Plan by various fixed dates, to complete planning

for the 2020 Facilities Plan by a fixed date and to complete

and implement a Capacity, Management, Operation and

Maintenance (CMOM) self-auditing program.3 (MMSD’s Br.

at 13.) However, the Dane County judge refused to approve

the 2001 Stipulation, saying, “It does seem to me that at some

point a court’s involvement in a case must end. It also

seems to me that this case has gone well beyond that point.”

(Plaintiffs’ Short Appx. at 9.4)

Subsequently, the State and MMSD agreed to meet with

the plaintiffs to discuss their concerns about the proposed

3

MMSD notes that the Environmental Protection Agency acknow-

ledges that “even municipal collection systems operated in an ex-

emplary fashion may experience unauthorized discharges under

exceptional circumstances.” (MMSD’s Br. at 10 n.4.) Also, the EPA

recently advocated reduction or elimination of penalties for munic-

ipalities that adopted the CMOM program. Id. However, the

Milwaukee Journal Sentinel recently reported that a top EPA official

characterized MMSD as “the worst dumper on Lake Michigan and

among the worst on the Great Lakes.” Schultze and Rohde, supra

note 2, at 1B.

4

For ease of reference, citations to the Plaintiffs’ Short Appendix

will be designated by “PSA at __.”

No. 03-3809 7

2001 Stipulation. The State agreed, at the plaintiffs’ re-

quest, to hold off filing suit against MMSD until March 15,

2002, while settlement negotiations took place. (MMSD’s

Br. at 14.) However, the agreement failed to include a pro-

vision that the State be allowed to file first on that date.

After the negotiations failed, the plaintiffs filed their suit at

7:57 a.m. on March 15, 2002 in the Eastern District of

Wisconsin, alleging 165 SSOs from various locations during

the period from January 1, 1995 to September 25, 2001.

Later that same day, the State filed suit in Milwaukee County

Circuit Court, counting the same 165 SSOs as 13 SSO events

in accordance with the terms of MMSD’s permit and finding

eight of the 13 to be violations of MMSD’s permit and three

to require additional investigation. (MMSD’s Br. at 15 n.6;

PSA at 7.) The plaintiffs, under Wisconsin law, could have

requested to intervene in the State’s suit but did not do so.

Wis. Stat. § 803.09.

On May 29, 2002, while the plaintiffs’ suit was pending,

the Milwaukee County Circuit Court, at the request of the

State and MMSD, entered a stipulation (2002 Stipulation)

that settled the State’s lawsuit. The 2002 Stipulation was

“substantially the same” as the 2001 Stipulation: although

the compliance schedule had been compressed, the scope of

the work remained the same. (MMSD’s Br. at 16.) The

plaintiffs have several problems with the 2002 Stipulation,

the main problem apparently being the lack of any penalties

for past violations or provisions for penalties in the event of

future violations, though other flaws are mentioned. (See,

e.g., Plaintiffs’ Br. at 13-14, 32; MMSD’s Supp. Appx. at 87-

95.) The 2002 Stipulation, like the 2001 Stipulation, re-

quires MMSD to undertake various improvement projects

which will cost taxpayers $907,000 through 2010. It also

rescinded the 2001 Stipulation that the State and MMSD

had previously filed.

Shortly thereafter, MMSD moved to dismiss the plaintiffs’

complaint. An Audit Report subsequently released by the

8 No. 03-3809

Wisconsin Legislative Audit Bureau (2002 Audit Report)

(Plaintiffs’ Sep. Appx. at 205-301) highlighted several fac-

tors contributing to MMSD’s continuing CSOs and SSOs,

including large storms in recent years; capacity issues in

the Deep Tunnel and MMSD’s sewers and treatment facilities;

and operational policies that have exacerbated overflows.

Id. at 231. But the district court nonetheless found that the

State had commenced and diligently prosecuted judicial and

administrative actions against MMSD, resulting in a lack

of subject matter jurisdiction that barred the plaintiffs’

citizens suit from proceeding. In the alternative, the district

court found that res judicata would bar the litigation. The

plaintiffs now appeal both of these findings.

II. Discussion

The plaintiffs brought this suit seeking a declaratory

judgment, injunctive relief, civil penalties and costs and

fees under the citizens’ suit provision of the Clean Water

Act. The district court had federal question jurisdiction pur-

suant to § 505(a) of the Act. 33 U.S.C. § 1365(a); 28 U.S.C.

§ 1331. We have jurisdiction pursuant to 28 U.S.C. § 1291

because the district court entered a final judgment dismiss-

ing this case due to a lack of subject matter jurisdiction.

We review de novo the district court’s dismissal of the

plaintiffs’ suit for lack of subject matter jurisdiction. Transit

Express, Inc. v. Ettinger, 246 F.3d 1018, 1023 (7th Cir. 2001).

In considering a motion to dismiss for lack of subject matter

jurisdiction, we must accept the complaint’s well-pleaded

factual allegations as true and must draw all reasonable

inferences from those allegations in plaintiffs’ favor as the

non-moving party. Id. We also employ the de novo standard

in reviewing the dismissal of an action on res judicata

grounds. 4901 Corp. v. Town of Cicero, 220 F.3d 522, 527

(7th Cir. 1999).

No. 03-3809 9

The Clean Water Act provides that “any citizen may com-

mence a civil action on his own behalf—(1) against any

person . . . who is alleged to be in violation of (A) an effluent

standard or limitation under this [Act].” 33 U.S.C.

§ 1365(a). Pursuant to the Act, no action may be brought

“prior to sixty days after the plaintiff has given notice of the

alleged violation (i) to the Administrator, (ii) to the State in

which the alleged violation occurs, and (iii) to any alleged

violator of the standard, limitation, or order.” Id. at

§ 1365(b)(1)(A). Citizens are also barred from bringing suit

“if the Administrator or State has commenced and is

diligently prosecuting a civil or criminal action in a court of

the United States, or a State to require compliance with the

standard, limitation, or order.” Id. at § 1365(b)(1)(B). In

addition, any violation “with respect to which a State has

commenced and is diligently prosecuting an action under a

State law comparable to” the subsection of the Act address-

ing administrative actions “shall not be the subject of a civil

penalty action.” 33 U.S.C. § 1319(g)(6)(A). However, this

limitation is inapplicable to a citizens’ suit that is filed

before the State commences administrative action. Id. at

§ 1319(g)(6)(B).

Here, the plaintiffs gave the required written notice to

MMSD, to the United States Environmental Protection

Agency (United States EPA) and to the State of its intent to

sue, and the plaintiffs’ complaint was filed more than 60

days after notice was given. Whether the State had “com-

menced and [was] diligently prosecuting a civil . . . action”

or administrative action at the time the plaintiffs filed suit,

and if not, whether res judicata nonetheless bars the plaintiffs’

suit, are the issues we must resolve.

A. Did WisDNR timely commence and diligently

prosecute a civil or administrative action?

In determining whether the plaintiffs’ suit was barred

under § 1365(b)(1)(B), the district court discussed three of

10 No. 03-3809

the State’s judicial actions: the 1977 Stipulation (which

arose out of the 1976 litigation and addressed earlier vio-

lations); the 2001 Stipulation (which was filed as an at-

tempted continuation of the 1976 litigation to address the

violations alleged by the plaintiffs but was not accepted by

the Dane County court and was later rescinded by the 2002

Stipulation); and the 2002 Stipulation (which ended

litigation that had been filed in Milwaukee County court

later on the same day that the plaintiffs filed suit in district

court). The district court also examined whether adminis-

trative actions undertaken by the State barred the plain-

tiffs’ suit for civil penalties under § 1319(g). We will

consider in turn each of these four hurdles facing the

plaintiffs.

1. The 1976 litigation and 1977 Stipulation

No one disputes (or could dispute) that the 1976 litigation

in Dane County and the resulting 1977 Stipulation occurred

or were commenced before the plaintiffs’ suit was filed

nearly 25 years later. However, whether these actions also

qualify as a diligent prosecution of violations that occurred

after all work contemplated under the 1977 Stipulation had

been completed is another matter. The plaintiffs argue that

the 1977 Stipulation was over and done with by 1996 at the

latest. But even if we assume that the 1976 action were still

“open” to receive the filing of the 2001 Stipulation, the 1977

Stipulation could not qualify as a diligent prosecution of the

violations alleged by the plaintiffs since the projects

mandated by the 1977 Stipulation obviously did not prevent

those violations from occurring.

Whether the 1976 litigation and 1977 Stipulation con-

stituted a diligent prosecution of the historical violations

that had occurred prior to the 1976 litigation and the con-

templated violations that were going to continue to occur

until work was completed under the 1977 Stipulation is not

No. 03-3809 11

at issue here. Logically, however, the 1976 litigation and

1977 Stipulation cannot constitute diligent prosecution of

violations that have occurred (or continued to occur) after

all work under the 1977 Stipulation had been completed. If

the violations alleged by the plaintiffs occurred because of

lingering problems that the 1977 Stipulation failed to

resolve, the 1977 Stipulation cannot have been a diligent

prosecution of the circumstances causing those violations.

If, on the other hand, the violations alleged by the plaintiffs

occurred because of circumstances unrelated to those that

the 1977 Stipulation was intended to comprehensively

address, then the 1976 action cannot possibly have been a

diligent prosecution of violations due to circumstances

unknown and unlitigated at that time. Either way, the 1976

litigation and 1977 Stipulation do not amount to diligent

prosecution of the violations alleged by the plaintiffs.

2. The 2001 Stipulation

The 2001 Stipulation was filed as part of the 1976

litigation in Dane County Circuit Court before the 60-day

notice period had expired and before the plaintiffs filed their

suit. But the Dane County judge refused to enter the 2001

Stipulation, and the parties later rescinded it by the 2002

Stipulation, which was entered as part of a separate action

instituted in Milwaukee County Circuit Court. The district

court concluded that the Dane County court had retained

jurisdiction over the 1977 Stipulation and that the 2001

Stipulation was a diligently prosecuted continuation of the

same action. The plaintiffs argue that the Dane County

court lacked continuing jurisdiction because all work

contemplated under the 1977 Stipulation was long com-

pleted and that the flaws in the 2001 Stipulation render it

non-diligent.

With respect to the timeliness of the action, if the State

had chosen to file a brand new lawsuit rather than a new

12 No. 03-3809

consent order in a very old lawsuit, that lawsuit would have

been timely commenced. And if the Dane County judge had

approved the 2001 Stipulation after it was filed, the 2001

Stipulation would also have been a timely commenced

judicial enforcement action. The fact that the 2001 Stipula-

tion was never approved by the court and was later re-

scinded does not affect its timeliness, which is determined by

the date of filing.5 Connecticut Fund for the Environment,

Inc. v. Upjohn Co., 660 F. Supp. 1397, 1404 (D. Conn. 1987)

(“[T]he court must apply an inflexible rule which deter-

mines jurisdiction from the time of filing the complaint.”).

But the court’s non-approval does render the 2001 action a

non-diligent prosecution.6 Even though the 2001 Stipulation

may have been intended to address “dry and wet weather

5

For the purposes of deciding whether the 2001 Stipulation was

a timely commenced action, under circumstances such as these,

we are reluctant to use the initiation of an older judicial action to

back-date the commencement of an action under the Clean Water

Act as suggested by MMSD. (MMSD’s Br. at 27-28.) If a state

agency were allowed to indefinitely continue an enforcement action

so as to ensure that it always has on the back burner a court

action that has been “commenced” before any later citizens’ suit

could be filed, that arrangement would eviscerate the timely

commencement requirement because the agency could wait as

long as it liked before responding to any citizens’ suit. Using the

earlier commencement date might also indicate a lack of diligence

in resolving problems known about for years. See New York

Coastal Fisherman’s Ass’n v. New York City Dept. of Sanitation,

772 F. Supp. 162, 168 (S.D.N.Y. 1991) (finding that prosecution

was not diligent where orders were amended to extend deadlines

and a target completion date of 1995 was “simply too long to

rectify a problem that has been known about since 1983”). Here,

the 2001 Stipulation was filed before the 60-day window expired

or a citizens’ suit was filed and was therefore timely.

6

It is also troubling that the 2001 Stipulation was filed without

opportunity for notice and comment by the public, including the

plaintiffs.

No. 03-3809 13

overflows, and mandate[ ] three extensions to the Deep

Tunnel” (PSA at 19), the fact that the Dane County judge

refused to enter the 2001 Stipulation (whether on a jurisdic-

tional basis or otherwise) robbed that Stipulation of any

legally binding effect. Even if the 2001 Stipulation had

bound the parties, it was rescinded a few months later by

the 2002 Stipulation, which resolved a separate judicial

action filed in a different court. The fact that the 2002

Stipulation was very similar to the 2001 Stipulation does

not equip the 2001 Stipulation with the teeth required to

qualify on its own as a diligent prosecution. A judicial ac-

tion that never resulted in any legally binding agreement to

resolve the violations alleged by the plaintiffs (and was

rescinded before MMSD took any actions toward complying

with it) is not a diligent prosecution.

3. The 2002 litigation and 2002 Stipulation

The plaintiffs argue that a timely commenced action must

be filed prior to a citizens’ suit in order for it to have

potentially preclusive effect under the Act. Since the plaintiffs

filed their suit several hours before the state’s suit was filed,

they argue that the State’s 2002 litigation was not timely

commenced. MMSD counters that the State agreed to post-

pone filing its complaint until March 15, 2002 at the plaintiffs’

request, in order to give the parties a chance to negotiate a

satisfactory resolution. The parties did not incorporate into

their agreement to postpone filing their lawsuits any

provision governing which party would be considered to

have filed first. The district court did not weigh in on this

issue, finding that the State’s 2002 suit was filed several

hours after the plaintiffs’ suit, and apparently concluding

that it could not qualify as a timely commenced judicial

action. (PSA at 21.)

We are relieved to note that races to the courthouse to file

Clean Water Act complaints, such as the one which took place

14 No. 03-3809

here, are rare, though the caselaw relating to such situa-

tions is correspondingly sparse. When there has been an

agreement between the parties that the citizens would file

first, the citizens’ suit has been held not to be barred by a suit

filed by the state agency later the same day. Chesapeake Bay

Found. v. Am. Recovery Co., 769 F.2d 207, 207-08 (4th Cir.

1985). Similarly, where the state agency had asked the

citizens to postpone filing their suit, the earlier-filed citi-

zens’ suit was not barred. Long Island Soundkeeper Fund, Inc.

v. New York City Dep’t of Envtl. Prot., 27 F. Supp. 2d 380,

382-83 (E.D.N.Y. 1998). MMSD argues that these cases are

inapposite here because the State postponed filing its suit

at the plaintiffs’ request and not the other way around.

However, these decisions (and others) arrived at their

holdings by employing a literal, inflexible interpretation

compelled by the clear and unambiguous language of the

Act. See Chesapeake Bay Found., 769 F.2d at 208 (“This latter

statutory bar is an exception to the jurisdiction granted in

subsection (a) of § 1365 and jurisdiction is normally de-

termined as of the time of the filing of a complaint. More-

over, the verb tenses used in subsection (b)(1)(B) and the

scheme of the statute demonstrate that the bar was not

intended to apply unless the government files suit first (and

is diligently prosecuting such suit).”); Long Island

Soundkeeper Fund, 27 F. Supp. 2d at 383 (“The language of

this statute ‘clearly contemplates action prior to the filing of

a citizen suit.’ ”) (internal citation omitted); Connecticut

Fund for the Env’t, 660 F. Supp. at 1404 (“[T]he court must

apply an inflexible rule which determines jurisdiction from

the time of filing the complaint.”). We are not inclined to

add our encouragement to a race to the courthouse. Nor do

we wish to discourage state agencies from attempting to

resolve disputes through negotiation with citizens’ groups.

But the clear and unambiguous language of § 1365(b)(1)(B)

and its uniform interpretation by the courts on a jurisdic-

tional point dictate a conclusion that the State’s 2002

No. 03-3809 15

litigation (and resulting 2002 Stipulation) cannot qualify as

a timely commenced action barring the plaintiffs’ suit.7

Any similarity of the 2002 Stipulation to an ineffective

stipulation that was timely filed in a different suit in a dif-

ferent court (i.e., the 2001 Stipulation) does not alter the

outcome. Thus, we find that the State’s judicial action re-

sulting in the 2002 Stipulation was commenced when the

Milwaukee County suit was filed after the plaintiffs’ suit

was filed on March 15, 2002, not when the 2001 Stipulation

was filed (or earlier). Any other conclusion would allow state

agencies to file “placeholder” lawsuits or consent decrees to

ensure timely commencement and then to grapple with the

problem at their (relative) leisure, subject only to the dili-

gent prosecution requirement (which, as the district court

noted, is a deferential standard). Since the Milwaukee

County action does not meet the timely commencement re-

quirement, it cannot bar the plaintiffs’ citizens’ suit under

§ 1365(b)(1)(B), whether it is diligent or not. We will address

the question whether the 2002 Stipulation represents a dili-

gent prosecution of the violations alleged by the plaintiffs

later, in our discussion of res judicata.

4. WisDNR’s administrative actions

As the Eleventh Circuit has recently noted,

[c]ourts that have addressed § 1319(g)(6)(A)(ii)—the

“diligent-prosecution bar”—have interpreted the statute

to bar citizen suits when three requirements are satisfied.

First, the state must have “commenced” an enforcement

procedure against the polluter. Second, the state must

be “diligently prosecuting” the enforcement proceedings.

7

We note that the State could have avoided this outcome by

incorporating a “first to file” provision into its agreement with the

plaintiffs to postpone filing any suit until March 15, 2002.

16 No. 03-3809

Finally, the state’s statutory enforcement scheme must

be “comparable” to the federal scheme promulgated in

33 U.S.C. § 1319(g).

McAbee v. City of Fort Payne, 318 F.3d 1248, 1251 (11th Cir.

2003). In finding that the State’s administrative enforce-

ment actions barred the plaintiffs’ suit under § 1319(g), the

district court here referred to such actions as meetings

between the EPA and WisDNR, between WisDNR and MMSD

and between all three entities (PSA at 5, 6); information

requests by WisDNR that MMSD had to comply with (PSA

at 6); projects outlined by WisDNR for MMSD to “focus on

initially” (PSA at 7); investigation of overflow events

between February and July 2001 (id.); the issuance of an

informal notice of non-compliance to MMSD shortly after

the plaintiffs’ notice of intent to sue was received (id.; see

also Plaintiffs’ Br. at 33-34 (noting that until the State filed

its suit on March 15, 2002, it had never escalated its

“stepped” enforcement policy beyond the first level, which

is the issuance of an informal notice of non-compliance));

meetings between MMSD and WisDNR in August 2001 “to

negotiate a corrective action plan” (PSA at 8); and the

“formal referral of the matter” to WisDOJ, which subse-

quently filed the 2001 Stipulation in Dane County court

(PSA at 8-9). Although these actions undeniably resulted in

the eventual filing of the Milwaukee County action and the

2002 Stipulation, they do not themselves qualify as the

commencement of an administrative enforcement action

that would serve to bar the plaintiffs’ suit.

“Commencement” with respect to an administrative action

is not defined by the Act, and we have not previously had

the opportunity to weigh in on this issue. Other courts have

found that the filing of an administrative consent order

prior to the filing of a citizens’ suit would in most cases

qualify as the sort of administrative action that would bar

No. 03-3809 17

a citizens’ suit for civil penalties.8 But if the consent order

comes after the citizens’ suit is filed, the citizens’ suit may

proceed. See Altamaha Riverkeepers v. City of Cochran 162

F. Supp. 2d 1368, 1373 (M.D. Ga. 2001) (finding that pro-

posed consent order and fines that came after citizens’ suit

was filed did not bar suit). The Eighth Circuit has implied

that issuance of a formal Notice of Violation could also

qualify as the commencement of an administrative enforce-

ment action if it triggers notice and hearing procedures

designed to protect and give access to the public and in-

terested parties. Cf. Arkansas Wildlife Fed’n, 29 F.3d at

379-80. Letters and conferences where no public notice was

given and that did not result in hearings have been found

not to bar a citizens’ suit. See Tobyhanna Conservation

Ass’n v. Country Place Waste Treatment Co., 734 F. Supp.

667, 669-70 (M.D. Pa. 1989) (finding state environmental

department’s unsigned letter to alleged water discharge

permit violator setting administrative conference for which

no public notice was provided and at which no hearing was

held did not bar citizens’ suit); cf. PMC, Inc. v. Sherwin-

Williams Co., 151 F.3d 610, 618-19 (7th Cir. 1998) (noting

in context of the bar Resource Conservation and Recovery

Act (RCRA) places on citizens’ suits when judicial action

8

See McAbee, 318 F.3d at 1251 n.6 (“[M]ost courts that have

addressed the issue have concluded that issuance of an adminis-

trative consent order . . . would satisfy the ‘commencement’ re-

quirement.”); Arkansas Wildlife Fed’n v. ICI Ams., 29 F.3d 376, 380

(8th Cir. 1994) (concluding that filing administrative consent order

counted as “commencement” because interested third parties had

right to intervene and certain notice and hearing procedures

became available); Public Interest Research Group, Inc. v. Elf

Atochem N. Am., Inc., 817 F. Supp. 1164, 1173 (D.N.J. 1993)

(“Order and Notice, issued pursuant to state regulations specifi-

cally providing for due process protections in the initiation of

enforcement proceedings, was the actual initiation or ‘commence-

ment’ of an enforcement proceeding”).

18 No. 03-3809

has been commenced, that “[w]riting a letter would hardly

be described as ‘commencing’ or ‘prosecuting’ an ‘action’ . . . ,

especially when we consider the interminable character of

much administrative process and the difficulty of deciding

on a threshold below which the process is too tentative to

justify barring a citizen’s suit”) (citations omitted).

Discerning from these various decisions the contours of

the law, we conclude that with respect to administrative

enforcement actions, the “commencement” of the action is

tied in with the “comparability” of the state statute to the

federal provisions. Specifically, we hold that for the pur-

poses of § 1319(g), an administrative action “commences” at

the point when notice and public participation protections

become available to the public and interested parties.

Because Wisconsin law does not authorize administrative

penalty proceedings or fines, there are no administrative

enforcement provisions “comparable” to those of the Clean

Water Act. Rather, when WisDNR decides that a violation

requires enforcement, Wisconsin law provides that WisDNR

“shall refer the matter to [WisDOJ] for enforcement,” and

WisDOJ “shall initiate the legal action requested by”

WisDNR. Wis. Stat. § 283.89(1)-(2). MMSD admits that

Wisconsin’s permissive intervention statute is triggered

only when the administrative enforcement advances to the

stage at which a legal action is filed. (MMSD’s Br. at 39.)

Thus, in Wisconsin, the “formal moment” at which an action

is commenced is when WisDOJ files a complaint with state

or federal court because “[f]rom this formal moment en-

forcement becomes public.” Wisconsin Envtl. Law Advocates v.

Wisconsin Power & Light Co., 03-C-0739-S, at 17 (W.D. Wis.

May 3, 2004).

We conclude that the non-judicial actions taken by the

State did not commence an administrative action barring

the plaintiffs’ suit under § 1319(g), because at no point prior

to the filing of the Milwaukee County suit did the state’s

administrative enforcement procedures contemplate public

No. 03-3809 19

notice and participation. Although the filing of the 2001

Stipulation was a judicial action, there was no opportunity

provided for public notice or participation. Moreover, as we

noted earlier, the 2001 Stipulation was not a diligently

prosecuted action because it was not legally binding and

was withdrawn by the 2002 Stipulation. And the Milwaukee

County action was filed too late. Because the State did not

timely “commence” and diligently prosecute an administra-

tive enforcement action, the plaintiffs’ suit for civil penalties

is not barred by § 1319(g). And, as we have already con-

cluded, the plaintiffs’ suit is not barred under § 1365(b)(1)(B)

by any of the State’s judicial enforcement actions.

B. Res judicata

The district court found that the 2002 Stipulation “is

drafted to resolve all potential liability for the alleged san-

itary sewer overflows occurring after 1994 and bring MMSD

into compliance with the WPDES permit.” (PSA at 24.) It

went on to conclude that, in addition to being barred under

the Act by prior actions taken by the State, the plaintiffs’

suit would also be barred under res judicata. According to

Wisconsin law,

[u]nder the doctrine of claim preclusion, a subsequent

action is barred when the following three factors are

present: (1) identity between the parties or their privies in

the prior and present suits; (2) prior litigation resulted

in a final judgment on the merits by a court with

jurisdiction; and (3) identity of the causes of action in

the two suits.

Sopha v. Owens-Corning Fiberglas Corp., 230 Wis. 2d 212,

233-34 (Wis. 1999).

The plaintiffs do not challenge that the second element

has been established. They do, however, challenge whether

the plaintiffs’ causes of action were the same as those

20 No. 03-3809

brought by the State in the Milwaukee County action and

whether MMSD has demonstrated that the State was in

privity with the plaintiffs.

1. Identity of causes of action

Wisconsin takes a “transactional” approach to determin-

ing whether there is an identity of causes of action. N.

States Power Co. v. Bugher, 189 Wis. 2d 541, 550 (1995).

“What factual grouping constitutes a ‘transaction,’ and what

groupings constitute a ‘series,’ are to be determined prag-

matically, giving weight to such considerations as whether the

facts are related in time, space, origin, or motivation, [and]

whether they form a convenient trial unit . . . .” Id. at 554.

The plaintiffs argue that their suit is broader and dif-

ferent in scope than the State’s 2002 suit in Milwaukee

County. The plaintiffs point to specific differences, including

their allegations of violations from 165 locations (as opposed

to on 8 occasions); a higher volume of unpermitted discharges

(900 million gallons as opposed to 471 million gallons); dry

weather discharges from sanitary sewers; MMSD’s “consis-

tent operational and management problems that have sig-

nificantly contributed to the exceedingly high number and

volume of unpermitted discharges” (Plaintiffs’ Br. at 44);

and additional violations, including one in August 2002

involving 412 million gallons of sewage that was not covered

by the 2002 Stipulation (which resolved MMSD’s liability

for all SSOs “to the latest date upon which either of the

parties executes this agreement” (id. at 45)).

All of the plaintiffs’ purported pre-Stipulation differences

are swallowed up by the 2002 Stipulation’s broad scope. The

2002 Stipulation was intended to “present[ ] a comprehen-

sive solution to sanitary sewer overflows, regardless of their

cause, including but not limited to wet weather events,

equipment malfunctions, and operator error.” (Plaintiffs’

Sep. Appx. at 178-79.) It purported to relieve MMSD from

No. 03-3809 21

liability for all violations up to the date the 2002 Stipulation

was executed, including those that were not specifically

alleged in the State’s complaint. Thus, there is an undeni-

able identity of causes of action with respect to the pre-

Stipulation violations.

As for post-Stipulation violations, there are two reasons

why the unspecified ongoing or continuing violations alleged

in the plaintiffs’ complaint do not constitute a separate and

distinct cause of action. First, the Act itself bars the

bringing of any action “prior to sixty days after the plaintiff

has given notice of the alleged violation” to various parties.

33 U.S.C. § 1365(b)(1)(A) (emphasis added). This notice

must contain “sufficient information to permit the recipient

to identify the specific standard, limitation, or order alleged

to have been violated, the activity alleged to constitute a

violation, the person or persons responsible for the alleged

violation, the location of the alleged violation, [and] the date

or dates of such violation.” 40 C.F.R. § 135.3(a). As the

Supreme Court has noted, the purpose of this notice is

twofold: it “allows Government agencies to take responsibil-

ity for enforcing environmental regulations, thus obviating

the need for citizen suits,” and it “gives the alleged violator

‘an opportunity to bring itself into complete compliance with

the Act and thus likewise render unnecessary a citizen suit.’ ”

Hallstrom v. Tillamook County, 493 U.S. 20, 29 (1989)

(internal citation omitted). Even if the unspecified viola-

tions, such as the August 2002 violation, were sufficiently

well-pleaded by references to “ongoing” or “continuing”

violations, they were not mentioned in the required notice and

would therefore be barred by the Act, at least as part of this

particular suit.

The second reason why the unspecified post-Stipulation

violations are not separate and distinct causes of action is

that the 2002 Stipulation was intended to address the un-

derlying causes of the continuing violations by implement-

ing remedial measures some of which, due to their large

22 No. 03-3809

scale, will take several years to complete. The State was

unquestionably aware that violations would continue while

the projects mandated by the 2002 Stipulation are being

implemented. Even though the 2002 Stipulation does not

release MMSD from liability for post-Stipulation violations,

those post-Stipulation violations are clearly related in origin

to the pre-Stipulation violations and have the same factual

basis. Thus, the August 2002 violation (and other post-

Stipulation violations) not specifically mentioned in the

2002 Stipulation are not separate and distinct causes of

action, and the element of res judicata requiring an identity

of causes of action is met here.

2. Privity of the parties

We agree with the district court that a person not a party

to a previous action can be said to be in privity with an

“official or agency invested by law with authority to repre-

sent the person’s interests.” Restatement (Second) of

Judgments § 41(1)(d). Thus, “[e]ven when an agency en-

forcement action is not commenced until after the citizen

suit, final judgment in the agency’s court action will be a

res judicata or collateral estoppel bar to the earlier citizen

suit.” Comfort Lake Ass’n v. Dresel Contracting, 138 F.3d

351, 356 (8th Cir. 1998). This, however, presumes that the

agency was acting in its parens patriae role as a representa-

tive of the public. As a representative of the public’s

interests, the State is subject to the exceptions enumerated

in section 42 of the Restatement (Second) of Judgments,

including the following: “A person is not bound by a judg-

ment for or against a party who purports to represent him

if . . . [t]he representative failed to prosecute or defend the

action with due diligence and reasonable prudence, and the

opposing party was on notice of facts making that failure

apparent.” Restatement (Second) of Judgments § 42(1)(e).

Thus, in order for the state agency to be in privity with the

No. 03-3809 23

public’s interests, the state’s subsequently-filed government

action must be a diligent prosecution. And if the subse-

quently-filed government action is a diligent prosecution,

“the fact that . . . any . . . private attorney general is barred

from duplicating that effort should hardly seem surprising

or harsh.”9 Hudson River Fishermen’s Ass’n v. County of

Westchester, 686 F. Supp. 1044, 1052 (S.D.N.Y. 1988), quoted

in United States EPA v. Green Forest, 921 F.2d 1394, 1405

(8th Cir. 1990). So the question becomes whether the State’s

action was diligent.

We look to the language of the Act to find out what is

meant by “diligent prosecution.” Citizens’ suits are barred

“if the Administrator or State has commenced and is dili-

gently prosecuting a civil or criminal action in a court of the

United States, or a State to require compliance with the

standard, limitation, or order.” 33 U.S.C. § 1365(b)(1)(B)

(emphasis added). Thus, if the judicial action is “capable of

requiring compliance” with the Act and is “calculated to do

so,” the citizens’ suit will be barred. Jeffrey G. Miller,

“Overlooked Issues in the ‘Diligent Prosecution’ Citizen Suit

Preclusion,” 10 Wid. L. Symp. J. 63, 84, 85 (2003). Not-

withstanding these considerations, diligence does not

require a state agency to have perfect foresight. As we have

previously held in the context of the RCRA, which has a

9

We decline to adopt the plaintiffs’ argument that “in a situation

where a citizen suit has been filed prior to the State’s commence-

ment of an enforcement action, the privity element of res judicata

can never be satisfied.” (Plaintiffs’ Br. at 40.) See Atlantic States

Legal Found., Inc. v. Eastman Kodak Co., 933 F.2d 124, 127 (2d

Cir. 1991) (“However, we do not believe the Clean Water Act can

or should be read to discourage a governmental enforcement ac-

tion once a citizen suit has been commenced nor to prevent state

or local authorities from achieving a settlement as to conduct that

is the subject of a citizen complaint. To hold otherwise would

likely lead to underenforcement of the Clean Water Act.”).

24 No. 03-3809

materially similar diligent prosecution requirement, “[t]he

statute does not require that the [State] succeed; it requires

only that the [State] try, diligently.” Supporters to Oppose

Pollution v. Heritage Group, 973 F.2d 1320, 1324 (7th Cir.

1992).

The district court found that the 2002 litigation and

Stipulation represented a diligent prosecution because the

2002 Stipulation was intended by the parties to present “a

comprehensive solution to sanitary sewer overflows, regard-

less of their cause, including but not limited to wet weather

events, equipment malfunctions, and operator error” (PSA

at 22) and to “bring MMSD into compliance with the WPDES

permit” (id. at 24). The 2002 Stipulation requires signifi-

cant changes to MMSD’s operating structure at consider-

able expense, including storage and conveyance capacity ex-

pansions and treatment plant and interceptor sewer up-

grades. MMSD was obligated to complete its sanitary sewer

evaluation study and to require satellite municipalities to

reduce inflow and infiltration by 5% by the end of 2002.

MMSD was additionally required to implement a CMOM

plan by June 30, 2007, which is intended to help reduce

(with the goal of eliminating) all non-permitted SSOs.

(Plaintiffs’ Sep. Appx. at 184.)

We recognize that diligence on the part of the State is pre-

sumed. See, e.g., Connecticut Fund for the Env’t v. Contract

Plating Co., 631 F. Supp. 1291, 1293 (D. Conn. 1986) (“[T]he

court must presume the diligence of the state’s prosecution

of a defendant absent persuasive evidence that the state has

engaged in a pattern of conduct that could be considered

dilatory, collusive, or otherwise in bad faith.”). We surmise

that this presumption is due not only to the intended role

of the State as the primary enforcer of the Clean Water Act,

see Gwaltney of Smithfield, Inc. v. Chesapeake Bay Found.,

Inc., 484 U.S. 49, 60 (1987), but also to the fact that courts

are not in the business of designing, constructing or

maintaining sewage treatment systems. See North & S.

No. 03-3809 25

Rivers Watershed Ass’n v. Scituate, 949 F.2d 552, 557 (1st

Cir. 1991). Yet, we think a diligent prosecution analysis

requires more than mere acceptance at face value of the

potentially self-serving statements of a state agency and the

violator with whom it settled regarding their intent with

respect to the effect of the settlement. Our diligent prosecu-

tion analysis of the 2002 Stipulation will examine whether

it is capable of requiring compliance with the Act and is in

good faith calculated to do so. See Miller, supra, 10 Wid. L.

Symp. J. at 84, 85.

The plaintiffs raise several concerns about the diligence

of the 2002 Stipulation that can be easily dispensed with,

and one which we think has merit. All are nonetheless worth

discussing. First, the plaintiffs argue the 2002 Stipulation

is not a diligent prosecution because it does not include a

provision expressly requiring compliance with MMSD’s

WPDES permit and the Act. MMSD rejoins that, it is not

necessary to include language requiring compliance because

the Act and Wisconsin’s permitting statute themselves

require compliance, and the 2002 Stipulation does not

relieve MMSD from its obligation to comply. The State is

not prevented from bringing enforcement actions if post-

Stipulation violations occur. Moreover, MMSD points out

that adding compliance language would not bring about

compliance absent treatment of the underlying causes of the

violations. See Clean Air Clean Air Council v. Sunoco, Inc.,

2003 U.S. Dist. LEXIS 5346, at *15-*16 (D. Del. 2003)

(rejecting a plaintiff’s contention that the state’s consent

order should have included language requiring compliance

and focusing the diligent prosecution inquiry on the actions

required to eliminate the cause of the violations). We agree

that the focus of the diligent prosecution inquiry should be on

whether the actions are calculated to eliminate the cause(s)

of the violations. Since MMSD was not relieved from

complying with the Act and its permit, the addition of

compliance language in the present circumstances is

26 No. 03-3809

unnecessary and would not bring about compliance any

faster or more efficiently.

The plaintiffs also argue that the 2002 Stipulation gives

MMSD until 2010 to complete construction of certain sewer

improvements which are not guaranteed to result in com-

pliance with the Act. MMSD points out that the deadlines

are necessary “because of the actual amount of time it takes

to plan, solicit bids, and construct public works of this mag-

nitude.” (MMSD’s Br. at 25.) The deference we owe to the

State’s actions comes into play in determining whether

these deadlines are too lengthy to be diligent: as we have

said, we are not in the business of constructing sewage facil-

ities. We conclude that the construction deadlines incorpo-

rated in the 2002 Stipulation are not so lengthy as to

indicate a lack of diligence. “Merely because the State may

not be taking the precise action Appellant wants it to or

moving with the alacrity Appellant desires does not entitle

Appellant to injunctive relief.” Scituate, 949 F.2d at 558,

quoted in Supporters to Oppose Pollution, 973 F.2d at 1324.

The plaintiffs also allege that the 2002 Stipulation does

not address the violations that are due to operational fail-

ures and mismanagement, though the only specific MMSD

policy the plaintiffs have pointed out as mismanagement is

the policy of reserving a certain amount of Deep Tunnel

capacity to handle wet-weather SSOs, resulting in larger-

than-necessary CSOs.10 Specifically, after a July 1999 storm

that resulted in a 62.2 million gallon SSO, MMSD increased

the volume of capacity it reserves in the Deep Tunnel to

accommodate sanitary sewage, from 40 million gallons to

200 million gallons. (PSA at 241.) Although this policy has

10

This policy was first mentioned by the plaintiffs at oral argu-

ment when discussing MMSD’s “mismanagement.” Prior to that,

the plaintiffs had never specified which operational or manage-

ment problems were causing violations.

No. 03-3809 27

reduced the volume of SSOs, it did so by allowing CSOs

instead, even at times when the Deep Tunnel was not filled

to capacity. (Id.) The 2002 Audit Report estimated that the

volume of CSOs between 1994 and July 2002 would have

been reduced by 656 million gallons if unused capacity had

not been kept in reserve. (PSA at 242.) But the solution to

this problem requires accurate prediction of weather

patterns and storm intensity. MMSD’s current automated

system lacks the sophistication to permit precise predictions

of sewage flow, and this, combined with the well-known

inaccuracies of weather forecasts, means that discharge

decisions are frequently made with incomplete information.

(PSA at 243.) MMSD is, however, installing a $3.3 million

Real Time Control System that provides updated informa-

tion on system performance every 15 minutes or less, which

should help MMSD maximize existing system capacity

during heavy storms. (PSA at 298.) We also note that the

CSOs caused by MMSD’s reservation of Deep Tunnel

capacity to handle sanitary sewage were not violations of the

Act or of MMSD’s permit. Though we question the permitting

decision that has created the incentive for MMSD to avoid

violations by shifting its discharges from SSOs to larger-

than-necessary CSOs during heavy storms, we cannot say

that MMSD’s reserve capacity policy is not in compliance

with the Act or its permit.11

Although the reasons contributing to MMSD’s recent

massive and distressing discharges of sewage indicate that

MMSD may not have put all of its operational and manage-

ment difficulties behind it, the plaintiffs’ vague allegations

that the 2002 Stipulation fails to address MMSD’s opera-

11

Mechanical failures have also caused some SSOs, but they rep-

resent less than half of one percent of the total volume discharged

from sanitary sewers from 1994-2002. Id. at 234. MMSD con-

firmed at oral argument that its dry weather SSOs were caused

by equipment malfunction.

28 No. 03-3809

tional and management difficulties are insufficient to

indicate that MMSD will thereby be prevented from com-

plying with the Act after work mandated by the 2002

Stipulation is completed. If any additional operational or

management problems have become evident since the 2002

Stipulation,12 the State and MMSD are entitled by the Act

to an opportunity to resolve them before the plaintiffs may

jump into the fray.

The last of the easily-disposed-of arguments is that the

2002 Stipulation imposes no penalties for past violations,

nor does it include stipulated penalties for future violations.

Basically, the plaintiffs seem to want us to announce a rule

that diligence requires penalties. With respect to the lack of

penalties for pre-Stipulation violations, MMSD argues that

under Gwaltney and the First Circuit’s interpretation of it

in North & South Rivers Watershed Ass’n v. Town of

12

See, e.g., Resler, The Sound of Lame Excuses, MILWAUKEE J.

SENTINEL, May 20, 2004, at 22A (“Officials of the Milwaukee

Metropolitan Sewerage District said this week that for an 18-hour

period in the middle of last weekend’s massive dumping of raw

sewage, only one of the three giant pumps critical to the operation

of the district’s controversial deep tunnel system was actually work-

ing. As storms drenched the area, that left just one pump to transfer

millions of gallons of sewage from the deep tunnel, where it is

stored, to the district’s two treatment plants.”); id. (“[A] construc-

tion project—the replacement of two huge galvanized steel holding

tanks on Jones Island—effectively reduced capacity at the

district’s two treatment plants. Critics have wondered why the

tanks are being replaced now during the rainy season, a legiti-

mate point.”); Steve Schultze and Marie Rohde, Equipment

Glitches Still Plague MMSD, MILWAUKEE J. SENTINEL, June 17,

2004, at 1A (“MMSD officials [agreed] that yet another project—

replacement of giant sewage holding tanks—also probably con-

tributed to the overflows, but only slightly. . . . Only one or two of

the three giant tunnel pumps were used during the May rains and

dumping because the holding tanks are under construction and

several months past their projected completion date.”).

No. 03-3809 29

Scituate, the government may choose to forego civil pen-

alties in favor of securing expensive capital improvements.

Given that the focus of our inquiry is on whether the State’s

actions are going to bring about compliance, the presence or

absence (or, for that matter, the size) of penalties does little,

on its own, to shed light on the diligent prosecution inquiry.

It is true that compliance may be coerced by penalties if

they are sufficiently high to deter the violations. See Miller,

supra, 10 Wid. L. Symp. J. at 86. In order to have a deter-

rent effect, the penalty must be high enough that the

violator would find it less expensive to take whatever actions

are necessary to comply than to continue violating. This is

why courts have considered whether penalties are assessed

and whether the amount of the penalty has taken into

account the economic benefit the violator derived from non-

compliance. See, e.g., Friends of the Earth, Inc. v. Laidlaw

Envtl. Svcs. (TOC), 890 F. Supp. 470, 489-95 (D.S.C. 1995),

vacated on other grounds, 149 F.3d 303 (4th Cir. 1998),

rev’d on other grounds, 528 U.S. 167 (2000).

But penalties are by no means a requirement for compli-

ance to be assured. Repeated violations due to the same

underlying systemic causes are likely to continue until a

large-scale remedial project addressing those underlying

causes is completed (assuming the large-scale project will

successfully and permanently abate the conditions causing

the violation). And large-scale remedial projects, as we have

earlier noted, can take years. We agree with the First

Circuit that “[d]uplicative actions aimed at exacting finan-

cial penalties in the name of environmental protection at a

time when remedial measures are well underway do not

further [the goals of the Clean Water Act]. They are, in fact,

impediments to environmental remedy efforts.” Scituate,

949 F.2d at 556; see also Peter A. Appel, “The Diligent

Prosecution Bar to Citizen Suits: The Search for Adequate

Representation,” 10 Wid. L. Symp. J. 91, 101-02 (2003)

(noting that allowing citizens’ suits for penalties to proceed

30 No. 03-3809

when expensive remedial action is required both hinders

negotiated settlements and is unlikely to help the environ-

ment). Levying additional penalties on violators who are

undertaking massive remedial projects will not bring about

compliance any faster or cause the result to be any more

effective—it will just cause the result to be more expen-

sively arrived at.

As for the post-Stipulation violations, although it is true

that there are no provisions for stipulated penalties in the

2002 Stipulation, MMSD points out that neither does it

prevent the State from bringing subsequent enforcement

actions for subsequent violations. The concern with diligent

enforcement is whether violations are prosecuted, not how

they are prosecuted. See Clean Air Council, 2003 U.S. Dist.

LEXIS 5346, at *11-*12 (finding that stipulated penalties

are just as diligent as seeking the same penalty in a

separate enforcement action). If the State fails to diligently

prosecute post-Stipulation violations, the plaintiffs may

prod it into action, as they did here.

We do, however, share the plaintiffs’ concern that the

planned improvements to MMSD’s system under the 2002

Stipulation may not in fact result in MMSD’s eventual

compliance with the Act and its permit. (See Plaintiffs’ Br.

at 30-31; Reply Br. at 6.) The 2002 Audit Report attributed

MMSD’s overflows to the magnitude of storms in recent

years, as well as capacity issues in the Deep Tunnel and

MMSD’s sewers and treatment facilities. (PSA at 231.)

During planning for the Deep Tunnel, the capacity require-

ments were estimated based on the largest storm previously

recorded in the Milwaukee area, which occurred in June

1940. (PSA at 234.) However, from the time the Deep

Tunnel came on line in 1994 through July 2002, there were

five storms larger than the June 1940 storm of record, result-

ing in discharges of 394.7 million gallons from sanitary sewers

and over 4 billion gallons from combined sewers. (PSA at

235.) Not only has the Deep Tunnel been unable to handle

No. 03-3809 31

storms larger than it was designed for, but it has also proved

insufficient to capture wastewater from storms smaller

than the storm of record on nine occasions, resulting in

SSOs totaling approximately 528 million gallons. (PSA at 236.)

The Deep Tunnel was also planned based on assumptions

that infiltration and inflow from surrounding communities

would be reduced by 12.5%; they have instead increased by

17.4%. (PSA at 237.) Sedimentation has further reduced

available capacity in the Deep Tunnel by a small amount

(2.1 million gallons). (PSA at 240.)13

We do not deny that increasing the storage and conveyance

capacity in MMSD’s system should reduce the number and

volume of overflows. But MMSD itself admits that what the

2002 Stipulation accomplishes is the eventual reduction of

overflows, not elimination of them. As MMSD pointed out

to the plaintiffs, “[t]he Northwest Side Sewer Relief Project

is intended to have sufficient capacity to capture most of the

volume of events comparable to those experienced since the

start up of the Inline Storage System. . . . [R]eduction in

number of SSO events is contemplated; not a percent re-

duction in total volume of SSO’s.” (MMSD’s Supp. Appx. at

98; see also MMSD’s Br. at 46 (noting that the State ac-

complished “guaranteed meaningful relief in the form of

capital improvements and operational changes that will

actually reduce the number of overflow events”) (emphasis

added).) Compliance means an end to violations, not merely a

reduction in the number or size of them. That is why courts

have considered whether the alleged diligent prosecution

achieves a permanent solution or whether violations will

13

A problem related to siphons in the sewer system is causing a

significant amount of wastewater to be diverted into the Deep

Tunnel rather than being treated immediately by the treatment

plant (PSA at 239), but MMSD began a project in 2001 to improve

the efficiency and capacity of these siphons, which is expected to

be completed in 2007 (PSA at 299).

32 No. 03-3809

continue notwithstanding the polluter’s settlement with the

government. See Atl. States Legal Found., Inc. v. Eastman

Kodak Co., 933 F.2d 124, 127-28 (2d Cir. 1991); New York

Coastal Fishermen’s Ass’n v. New York City Dep’t of Sanita-

tion, 772 F. Supp. 162, 168 (S.D.N.Y. 1991).

Contrary to the district court’s finding, we do not feel con-

fident that the 2002 Stipulation will indeed result in elimina-

tion of the root causes underlying the large-scale violations

alleged by the plaintiffs, regardless of the State’s and MMSD’s

self-serving statements that it is intended to do so. We note

the persistence of violations due to the same underlying

causes even after the 1977 Stipulation was fully implemented

(and despite a similar intention that the capacity-increasing

projects would “eliminate dumping from sanitary sewers”14).

We also note the perhaps overly cautious pace adopted by

the State in evaluating the effectiveness of the remedial

projects required by the 1977 Stipulation—it took eight

years and a notice of intent to sue from the plaintiffs before

the State took any actions that went beyond investigating

and evaluating the violations that have persisted even after

the Deep Tunnel came on line. While the projects mandated

by the 1977 Stipulation may have been calculated in good

faith to ensure MMSD’s compliance, it should not have

taken the State so long to arrive at the conclusion that the

Deep Tunnel had been under-designed. These, along with

MMSD’s own admissions that the 2002 Stipulation is aimed

at reducing, not eliminating, violations, are insufficient to

indicate a diligent prosecution.15

14

Schultze and Rohde, supra note 2, at 1B.

15

Of course, we are aware that here, as with other regulatory cir-

cumstances, “efforts to achieve ‘the last 10 percent’ ” would be very

expensive. Stephen Breyer, BREAKING THE VICIOUS CIRCLE:

TOWARD EFFECTIVE RISK REGULATION 28 (Harvard Univ. Press

1993). But we are not talking about whether the proposed re-

(continued...)

No. 03-3809 33

Under the circumstances of this case, we cannot say that

simply throwing more money at the problems and taking an

inordinately long time to determine if enough money was

thrown at the problems to solve them this time around are

actions calculated in good faith to bring about compliance

with the Act. The record to date does not inspire confidence

that effective and timely action will be taken to address

problems of long standing. While the 2002 Stipulation will

hopefully result in fewer and smaller violations after the

mandated projects are completed, it is still, when all is said

and done, a stalling tactic rather than a compliance strat-

egy. As such, we cannot say that it is a diligent prosecution,

and we cannot uphold the district court’s determination

that res judicata bars the plaintiffs’ suit.16

III. Conclusion

Because we cannot state with certainty on the basis of

this record whether the 2002 Stipulation is calculated to

result in compliance with the Act, we therefore remand for

a determination of that issue. Specifically, the district court

15

(...continued)

medial efforts will eliminate the last gallon of sanitary sewerage

discharges in a 500-year storm; rather, we are concerned that the

remedial projects may, after their completion, nonetheless turn

out to be too little, too late.

16

We therefore need not determine whether fairness would render

res judicata inapplicable here. See Froebel v. Meyer, 217 F.3d 928,

935 (7th Cir. 2000) (“Wisconsin law does not treat res judicata as an

ironclad rule which must be implacably applied whenever its

literal requirements are met, regardless of any countervailing con-

siderations.”) (internal quotations omitted); McCourt v. Algiers, 4

Wis. 2d 607, 91 N.W.2d 194, 196 (Wis. 1958) (indicating that res

judicata may not apply where relitigation is necessary to prevent

unfairness).

34 No. 03-3809

should determine whether the systemic inadequacies of

MMSD’s sewerage facilities will be sufficiently ameliorated

by the proposed remedial projects to result in compliance.

If the district court concludes, after giving some deference

to the judgment of the State, that there is a realistic

prospect that violations due to the same underlying causes

purportedly addressed by the 2002 Stipulation will continue

after the planned improvements are completed, the plain-

tiffs’ suit may proceed. If, after a more detailed examination

of the 2002 Stipulation, the district court concludes that no

such prospect exists, it may so find, provide a thorough

explanation of its conclusion and consider reinvocation of

the res judicata bar. However, before reimposing a res

judicata bar, the district court should determine whether

Wisconsin’s fairness exception to the res judicata doctrine

should be applied here.17

Although we have allowed the plaintiffs’ suit to continue

(at least for the time being), we hope that the State, to-

gether with the parties in this matter, will take advantage

of this opportunity to review the efficacy of the 2002

Stipulation in light of recent events and will be able to

resolve their differences as well as the problems affecting

MMSD’s system. For the reasons stated above, the district

court is REVERSED, and the suit is REMANDED for further

proceedings in keeping with this opinion.

17

As Wisconsin’s Supreme Court has noted, “[c]laim preclusion

may be disregarded in appropriate circumstances when the

policies favoring preclusion of a second action are trumped by

other significant policies. Claim preclusion . . . is a principle of

public policy applied to render justice, not to deny it. Any ex-

ception to claim preclusion, however, must be limited to special

circumstances or the exceptions will weaken the values of repose

and reliance.” Sopha, 230 Wis. 2d at 236.

No. 03-3809 35

A true Copy:

Teste:

________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA-02-C-0072—9-2-04