The opinion
03/24/2022
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
January 20, 2022 Session
STATE OF TENNESSEE EX REL. HERBERT H. SLATERY, III, ET AL. v.
NECESSARY OIL CO., ET AL.
Appeal from the Chancery Court for Davidson County
No. 20-0827-III Ellen Hobbs Lyle, Chancellor
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No. M2021-00452-COA-R3-CV
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The State filed this action against the defendants for judicial enforcement of an order and
assessment entered by the Tennessee Department of Environment and Conservation
concerning violations of the Water Quality Control Act. The trial court granted partial
summary judgment in favor of the State as to the defendants’ liability for upfront civil
penalties and damages due under the order. We affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Affirmed; Case Remanded
JOHN W. MCCLARTY, J., delivered the opinion of the court, in which D. MICHAEL SWINEY,
C.J., and KRISTI M. DAVIS, J., joined.
Kenneth D. Hale, Bristol, Tennessee, for the appellants, Necessary Oil Co. and Realm
Properties, LLC.
Herbert H. Slatery, III, Attorney General & Reporter; Andree S. Blumstein, Solicitor
General; and Elizabeth P. McCarter, Senior Assistant Attorney General, for the appellees,
State of Tennessee ex rel. Herbert H. Slatery, III, in his official capacity as the Attorney
General & Reporter of Tennessee and David W. Salyers, P.E., Commissioner of the
Tennessee Department of Environment and Conservation.
OPINION
I. BACKGROUND
Necessary Oil Co. (“NOC”) is a Tennessee corporation operating as an oil recycling
facility in Bristol, Tennessee. Realm Properties, LLC (“Realm”) owns the real property
from which NOC operates. In January 2018, the Tennessee Department of Environment
and Conservation (“TDEC” or “State”) received a complaint regarding an unlawful
discharge from NOC’s site. TDEC personnel purportedly determined that a valve on an
above ground storage tank had failed, resulting in a liquid chemical being released from
the tank and spilling outside of the containment area before it discharged into Cedar Creek,
a violation of the Water Quality Control Act of 1977 (“the Act”), codified at Tennessee
Code Annotated section 69-3-101, et seq.
On January 12, TDEC issued a notice of violation letter to Mark E. Byington, the
owner and operator of NOC, requesting a corrective action plan (“CAP”) to eliminate the
discharge and to remediate the damage to Cedar Creek, along with a notice of intent
(“NOI”) to seek permit coverage for Tennessee Multi-Sector General Permit for
Stormwater Discharges Associated with Industrial Activity (“TMSP”). On January 29,
NOC submitted a CAP to address the spill, containment, and tank storage. NOC did not
submit an NOI at that time.
On May 25, TDEC sent NOC a second notice of violation letter, noting another
unpermitted discharge in violation of the Act. TDEC again requested CAPs for elimination
and remediation and an NOI to obtain coverage under the TMSP. On June 8, TDEC visited
NOC’s site and met with Mr. Byington to discuss corrective measures. NOC then
submitted a written response to the May 25 notice in which it delineated its mitigation
measures taken and requested an exemption from permit coverage under the TMSP.
TDEC responded by letter, dated July 9, directing NOC again to submit an NOI to
seek permit coverage under the TMSP. On January 12, 2019, and May 17, TDEC observed
that NOC’s site was still active. NOC still had not submitted the requested NOI for permit
coverage under the TMSP.
On July 10, 2019, TDEC, through its Commissioner, issued an Order and
Assessment to NOC and Realm (collectively “Defendants”), charging Defendants with
failure to obtain permit coverage for discharge of stormwater associated with industrial
activity and for polluting the State’s waters, in violation of the Act. The TDEC assessed
penalties and damages and listed corrective actions necessary to comply with the Order.
The total civil penalty assessed was $197,800, of which $39,560 was due as an upfront
civil penalty within 31 days following receipt of the order. Additional litigation damages
totaling $5,332.31 were also due within 31 days. The remainder of the penalty was subject
to Defendants’ compliance with the corrective actions. The Order was personally served
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on Defendants on July 15, through their registered agent, Mark E. Byington.
The corrective actions mentioned in the Order were as follows:
1. Submit an NOI for the TMSP and a “complete” Stormwater Pollution
Prevention Plan (“Prevention Plan”);
2. Submit a CAP and an engineering report for, inter alia, repairs to the
tank and containment area;
3. Submit photographic documentation of the completed CAP and
engineering report; and
4. Remove all hoses conveying water to or from Cedar Creek.
On July 24, TDEC personnel met with Mr. Byington at the site, where they
discussed the development of the Prevention Plan required by the Order and the submission
of the NOI. Two days later, Defendants submitted the requested NOI.
On August 29, 2019, the TDEC sent Defendants a demand letter, by certified mail,
seeking payment of the upfront civil penalty and damages. In September 2019, Defendants
finally submitted the required Prevention Plan, a CAP, and an engineering report.
Defendants failed to remit payment of the civil penalty of $39,560 or the additional
damages of $5,332.31 as requested by the demand letter and required by the Order.
On August 20, 2020, the State filed a complaint seeking judicial enforcement of the
terms of the TDEC Order and Assessment against Defendants, as well as injunctive relief
and the assessment of civil penalties against Byington, individually, to redress alleged
violations occurring after issuance of the TDEC Order. The State subsequently filed a
Motion for Partial Summary Judgment, seeking a monetary judgment for the State’s
expenses of $5,332.31 and the upfront civil penalty in the amount of $39,560.
The State argued that summary judgment was warranted pursuant to Tennessee
Code Annotated section 69-3-115(a)(2) based upon Defendants’ failure to file an
administrative appeal of the Order to the Tennessee Board of Water Quality, Oil, and Gas.
Section 69-3-115(a)(2) provides, in pertinent part, as follows:
(B) Any person against whom an assessment has been issued may secure
a review of such assessment by filing with the commissioner a written
petition setting forth the grounds and reasons for the objections, and asking
for a hearing in the matter involved before the board. If a petition for review
of the assessment is not filed within thirty (30) days after the date the
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assessment is served, the violator shall be deemed to have consented to the
assessment and it shall become final;
(C) Whenever any assessment has become final because of a person’s
failure to appeal the commissioner’s assessment, the commissioner may
apply to the appropriate court for a judgment and seek execution of such
judgment and the court, in such proceedings, shall treat a failure to appeal
such assessment as a confession of judgment in the amount of the
assessment; and
(D) The commissioner, through the attorney general and reporter, may
institute proceedings for assessment in the chancery court of Davidson
County or in the chancery court of the county in which all or part of the
pollution or violation occurred, in the name of the department.
The State’s statement of undisputed material facts provided, in pertinent part, that the
TDEC issued an Order and Assessment against Defendants, that the Order was personally
served on Defendants through Mr. Byington, that the Order assessed an upfront penalty of
$39,560 and additional damages of $5,332.31, that Defendants did not file an
administrative appeal of the Order, and that Defendants have not paid the upfront penalty
or additional damages as required by the Order.
Defendants admitted each statement in toto but still opposed the motion, arguing
that the Order contained no basis for the imposition of the penalties and damages as
required pursuant to Section 69-3-115(a)(3), that the penalty and damages violated the Due
Process Clause, and that the self-funding nature of the TDEC through the imposition of
penalties rendered the Order facially void ab initio. Section 69-3-115(a)(3) provides:
(3) In assessing the civil penalty, the commissioner may consider the
following factors:
(A) Whether the civil penalty imposed will be a substantial economic
deterrent to the illegal activity;
(B) Damages to the state, including compensation for loss or destruction
of wildlife, fish, and other aquatic life, resulting from the violation, as well
as expenses involved in enforcing this section and the costs involved in
rectifying any damage;
(C) Cause of the discharge or violation;
(D) The severity of the discharge and its effect upon the quality and
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quantity of the receiving waters;
(E) Effectiveness of action taken by the violator to cease the violation;
(F) The technical and economic reasonableness of reducing or
eliminating the discharge;
(G) The social and economic value of the discharge source; and
(H) The economic benefit gained by the violator.
Citing Sections 69-3-115(a)(2) and -116(b)1 the trial court granted partial summary
judgment in favor of the State, holding that Defendants were liable for the upfront penalty
and damages and that any attempts to challenge the findings in the Order or the
constitutional basis upon which the Order was entered were time-barred for failure to
timely petition for review of the Order to the appropriate board. The court certified the
judgment as final for purposes of appeal pursuant to Rule 54.02 of the Tennessee Rules of
Civil Procedure.2 This timely appeal followed.
II. ISSUES
We consolidate and restate the dispositive issues on appeal as follows:
A. Whether the trial court erred in holding Defendants’ constitutional
challenges to the order as time-barred.
B. Whether the trial court erred in its grant of partial summary judgment
on the award of the upfront civil penalty and damages.
1
“If an appeal from such assessment is not made to the board by the polluter or violator within
thirty (30) days of notification of such assessment, the polluter or violator shall be deemed to have consented
to such assessment and it shall become final.”
2
“When more than one claim for relief is present in an action . . . the court, whether at law or in
equity, may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties
only upon an express determination that there is no just reason for delay and upon an express direction for
the entry of judgment.”
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III. STANDARD OF REVIEW
Summary judgment is appropriate “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the moving party is entitled to a judgment
as a matter of law.” Tenn. R. Civ. P. 56.04.
We review a trial court’s summary judgment determination de novo, with no
presumption of correctness. Rye v. Women’s Care Ctr. of Memphis, MPLLC, 477 S.W.3d
235, 250 (Tenn. 2015). Therefore, “we make a fresh determination of whether the
requirements of Rule 56 of the Tennessee Rules of Civil Procedure have been satisfied.”
Id. In reviewing a summary judgment motion on appeal, “we are required to review the
evidence in the light most favorable to the nonmoving party and to draw all reasonable
inferences favoring the nonmoving party.” Shaw v. Metro. Gov’t of Nashville & Davidson
Cnty., 596 S.W.3d 726, 733 (Tenn. Ct. App. 2019) (citations and quotations omitted).
IV. DISCUSSION
A. & B.
Defendants argue that the trial court erroneously found that the TDEC’s Order was
not subject to attack based upon the failure to appeal the administrative decision to the
board. Citing our Supreme Court, Defendants contend that “the failure to raise []
constitutional issues before the agency [does] not preclude a party in a contested case from
raising the issue for the first time upon judicial review.” Richardson v. Tenn. Bd. Of
Dentistry, 913 S.W. 2d 446, 458 (Tenn. 1995). The State responds that Defendants’
reliance on Richardson is misplaced when Defendants raised an as-applied constitutional
challenge, not a facial constitutional challenge, to the imposition of the upfront civil
penalties and damages in this case under the Act.
In Richardson, the Supreme Court held that an administrative body may consider
and resolve questions of the “unconstitutional application of a statute to the specific
circumstances of a case.” Id. at 455. The Court continued “that the failure to contest the
constitutionality of a statute as applied or the constitutionality of an agency rule does not
prevent a party from raising those issues upon judicial review.” Id. at 457. More than a
decade later, faced with another mixture of constitutional challenges, the Supreme Court
revisited the issue, and held as follows:
Questions of whether the application of a statute violates constitutional
principles should be submitted to the agency through a petition for a
declaratory order before any action is brought in the Chancery Court.
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Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827, 846 (Tenn. 2008).
Defendants attempt to sidestep the as-applied basis of their challenges by asserting
that Section 69-3-115(a)(3) “fails to comport to even the most fundamental due process
rights in that it fails to require the disclosure of the basis for the assessment of civil
penalties.” Elsewhere, Defendants argue that the Order is deficient or void ab initio in that
it fails to provide a rational basis for the imposition of penalties and point to the factors
listed in the statute that may be considered by the Commissioner. Defendants further claim
that the self-help structure of an agency that benefits from the collection of penalties
violates the Due Process clause when the agency fails to articulate its basis for the penalties
imposed. The sum of the arguments presented establish that Defendants are challenging
the validity of the Order implementing the statute, e.g., whether the TDEC’s application of
the statute violates the Constitution under the particular circumstances presented.
Accordingly, we hold that Defendants’ failure to raise its as-applied constitutional
challenges through the administrative appeal process rendered the issues brought before
the trial court and now this court untimely and subject to waiver.
In consideration of the foregoing, we conclude that the State is entitled to partial
summary judgment as a matter of law as to the imposition of the upfront civil penalty and
damages because Defendants failed to file an administrative appeal of the Order, thereby
resulting in a confession of judgment under the Act pursuant to Sections 69-3-115(a)(2)(B)
and -116(b). We affirm the trial court’s grant of the motion for summary judgment.
V. CONCLUSION
For the reasons stated above, we affirm the decision of the trial court. The case is
remanded for such further proceedings as may be necessary. Costs of the appeal are taxed
to the appellants, Necessary Oil Co. and Realm Properties, LLC.
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JOHN W. MCCLARTY, JUDGE
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