holding trial court could consider evidence of defendant’s financial condition to ensure civil penalty “would not be so large as to send [defendant] into bankruptcy but would be large enough to deter future violations.”
How later courts described this case
- holding trial court could consider evidence of defendant’s financial condition to ensure civil penalty “would not be so large as to send [defendant] into bankruptcy but would be large enough to deter future violations.”
- overruling the Second District's decision to reduce the penalty amount for lack of evidence of excessive industrial waste discharge on each claimed day of violation
- a trial court abuses its discretion by assessing a penalty that is “unreasonable, arbitrary, or unconscionable”
- in the analogous context of water-pollution control, each term and condition of a permit is to be considered and given effect in determining whether a permit has been violated; whether the pollution-discharge limit was improperly exceeded is only one part of the inquiry
Written by the judges who cited it.
The opinion
Holmes, J.,
concurring in part and dissenting in part. I agree with the statement of law contained in paragraph one of the syllabus, and the reasoning by which the majority reaches it. Additionally, I agree with paragraph two of the syllabus as I do not doubt that a civil penalty was properly imposed upon DMI. However, I disagree with the amount of the penalty and the manner in which it was reached, so I must dissent.
The trial court imposed a penalty of $493,500 upon DMI. As the majority points out, this amount may be divided among three categories: $8,000 for economic benefit derived from its tardiness, $34,150 for environmental harm 6 and more than $450,000, in excess of 90 percent of the total fine, for “recalcitrance.” Since the major portion of this penalty is for recalcitrance, it is recalcitrance to which I turn.
The measure of DMI’s recalcitrance is gleaned by not merely examining its failure to comply in the present instance, but by examining its entire record at the Ironton facility. Prior to undertaking the present projects, DMI was in the midst of installing a $13 million cupola melting facility designed to insure that an increase in the production of hot metal would meet Ohio EPA air and water standards. Of this amount, $500,000 was spent to assure that *159 outfall 003 7 complied with DMI’s NPDES permit. This entire project was the largest ever undertaken at the Ironton facility. For its efforts in improving air quality by installing the cupola, DMI received awards from the Ohio EPA, the Heart and Lung Associaton and the Portsmouth Health Department. Recalcitrance should be made of sterner stuff.
This story of performance must be contrasted with the inability to timely comply here. The major problem was outfall 001. DMI was about 16 months behind its compliance schedule for outfall 001. The total spent to assure compliance at outfall 001 was $87,000 — • less than 20 percent of that spent to assure timely compliance at outfall 003. What economic benefit did DMI derive from its tardiness? The trial court found that DMI saved $8,000 because of its failure to timely comply.
This all leads to the inescapable conclusion that the record does not support the imposition of the $450,000 penalty for recalcitrance and indifference. Rather, the penalty is both unreasonable and excessive in light of all DMI’s efforts to assure that it will not pollute.
However, both the majority and the trial court justify the imposition of the penalty here by doing what they strenuously claim they are not: relying upon DMI’s size and financial ability to pay.
DMI timely objected to the admissibility of evidence of its financial condition. This objection was overruled. The trial court considered this evidence in assessing the penalty. Accordingly, in its opinion, the trial court stated that “DMI’s ability to pay is a significant factor” in the determination of the appropriate penalty; and in its decision and entry on defendant’s motion for new trial the trial court stated that “one of the key factors involved in determining the amount of the penalty is the size of the enterprise involved.” The admission and use of this evidence in the assessment of the penalty was prejudicial error.
The trial court, and the majority here, justify the utilization of DMI’s financial data upon the basis that the large penalty deters future violation and serves as an example to others so that the penalty will not be considered as a discharge fee. This approach for requiring compliance is not intended by the Clean Water Act. See Lloyd A. Fry Roofing Co. v. Texas (Tex. Civ. App. 1975), 524 S.W. 2d 313 .
It is universally agreed that the purpose of the civil penalty provisions of R.C. Chapter 6111 and similar provisions enacted in other states in accordance with the Federal Water Pollution Control Act is remedial and not punitive. In United States v. J. B. Williams Co. (S.D.N.Y. 1973), 354 F. Supp. 521, 530 , affirmed in part and reversed in part on other grounds (C.A. 2, 1974), 498 F. 2d 414 , the court stated:
“Where the sanction seeks to compel the person subject to it to do what he is legally required to do, the sanction is neither punitive nor criminal, but simply remedial in purpose.”
*160 One commentator has noted:
“A civil penalty is simply a monetary sum that is assessed and recovered in a civil proceeding for a violation of law. Although the civil penalty may be viewed as a sanction in the sense that it is imposed to produce obedience to environmental laws, it is not designed to punish the violator. Its purpose is deterrence or compensation, not retribution.” Marshall, Environmental Protection and the Role of the Civil Money Penalty: Some Practical and Legal Considerations, 4 Environmental Affairs 323, 330-331.
In this case, the penalty of $493,500 is clearly punitive in nature. The trial court found the economic benefit to DMI resulting from its delayed compliance at outfall 001 to have been only $8,000 (the total cost of the project at that outfall was only $87,000). The trial court found the environmental harm caused by DMI to be fairly compensated for by a fine of $34,150. A fine over 62 times the economic benefit derived by DMI and over 14 times the amount Assessed for environmental harm can have no purpose other than punishment.
The trial court’s imposition of this enormous penalty is not only contrary to the policies of the specific statutes involved, but is contrary to established principles governing the imposition of penalties.
“It is well established that penalties are not favored in either law or equity and should be imposed only when clearly justified.” State, ex rel. Reed, v. Indus. Comm. (1965), 2 Ohio St. 2d 200, 203 [ 31 O.O.2d 408 ]. 8
The trial court assessed the amount of the fine, beyond that portion of the fine for economic benefit and environmental harm, for “recalcitrance, defiance or indifference.” The EPA civil penalty policy provides for the addition of an amount for recalcitrance, defiance and indifference to the other portions of a fine. However, in calculating with mathematical rigidity an amount for “recalcitrance, defiance and indifference” under the EPA civil penalty policy, the trial court failed to consider that the purpose of any fine must be deterrence and not punishment. The amount assessed should be an amount sufficient to deter the “recalcitrance, defiance and indifference” shown, not to punish for it.
Federal cases have also noted that while the penalties are to deter violations, they are not to be punitive in nature. 9 In United States v. Detrex Chemical Industries, Inc. (N.D. Ohio 1975), 393 F. Supp. 735 , the court narrowly interpreted the penalty provision to avoid a punitive application:
“The court further concludes that while a $10,000 per violation per day penalty would also tend to effectuate the Congressional enforcement purpose, the truly devastating impact of such a construction on business is not what *161 Congress intended. Such a rule would tend more towards confiscation than mere deterrence.” Id. at page 738.
A civil penalty under the Clean Water Act was not designed to be “punitive in either purpose or effect.” United States v. Ward (1980), 448 U.S. 242, 251 (as applied to oil spill provision, Section 1321[b][6], Title 33, U.S. Code). A penalty based on deterrence represents the amount necessary to prevent future violations. The penalty may incidentally punish the offender, but its principal goals are compensation and deterrence. The civil penalty “is aimed less at the acts of polluters than at the resulting pollution itself.” United States v. General Motors Corp. (D. Conn. 1975), 403 F.Supp. 1151, 1162 . DMI and other potential violators of the Clean Water Act are “rational, profit-maximizing entities,” and therefore an analysis of their financial condition is unnecessary to determine the amount necessary for deterrence. If the penalty assessed exceeds the amount of economic benefit incurred from delayed compliance, such companies will choose not to pollute.
The purposes of R.C. 6111.09 are to compensate society for the harm caused by pollution and to deter violations. The financial worth of a defendant has no relation to either of these purposes. First, DMI’s ability to pay is unrelated to the offense committed. Its wealth is not relevant to determining an amount necessary to deter further violations because it is unrelated to any actions or inactions. Second, the amount required to compensate society for a defendant’s violations of its permit would be the same regardless of the size of the defendant. Third, although evidence of financial wealth is admissible in an action in which punitive damages are allowed, R.C. 6111.09 is not intended to be punitive. Fourth, there is no evidence in the record that a greater fine must be imposed on a larger corporation to deter it from future violations. In fact, “although monetary penalties are widely used in both the civil and criminal law, little empirical research has been done as to their impact on those they are intended to deter.” 2 Recommendations and Reports of the Administrative Conference of the United States 916 (July 1, 1970-December 31, 1972). Since evidence of the wealth of the defendant is admissible only in cases where wealth is necessarily involved in determining damages, such as in actions for defamation or injury to reputation, 21 Ohio Jurisprudence 2d, Evidence, Section 220, it was error to admit evidence of the financial condition of DMI because its financial worth is not “necessarily involved” in determining the penalty under R.C. 6111.09.
Accordingly, I would reverse the trial court’s determination of a penalty and remand for new findings.
C. Brown and Krupansky, JJ., concur in the foregoing concurring and dissenting opinion.
This figure is based more upon a hunch than the facts. The trial court admitted that “DMI’s pollutant in and of itself would have little effect on water quality.” Indeed, DMI’s failure to comply resulted in the release of no toxic chemicals, heavy metals or carcinogens. It created no particular health hazard. Compare United States v. Velsicol Chemical Corp. (W.D.Tenn. 1978), 8 E.L.R. 20745; California v. San Francisco (1979), 94 Cal.App. 3d 522 , 156 Cal. Rptr. 524 .
Work on outfall 003 was completed four months ahead of schedule.
See, also, Brown v. Executive 200, Inc. (1980), 64 Ohio St. 2d 250 [ 18 O.O.3d 446 ], Further, the state may seek punitive sanctions for truly outrageous behavior by requesting criminal penalties. See R.C. 6111.99.
State courts have similarly interpreted their civil penalty provisions. See, e.g., Southern Ill. Asphalt Co., Inc., v. Pollution Control Bd. (1975), 60 Ill. 2d 204 , 326 N.E. 2d 406 ; Lloyd A. Fry Roofing Co. v. Texas, supra.