Appendix — Rueth Development Co. v. United States

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APPENDIX A — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE SEVENTH

CIRCUIT DECIDED JULY 10, 2003

IN THE

UNITED STATES COURT OF APPEALS

SEVENTH CIRCUIT

No. 02-2045

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

RUETH DEVELOPMENT CO. and HAROLD G RUETH,

Defendants-Appellants.

- Appeal from the United States District Court for

the Northern District of Indiana, Hammond Division.

No. 2:96-cv-540—James T. Moody, Judge

ARGUED ApriL 9, 2003—DEcIDED JuLy 10, 2003

Before FLAUM, Chief Judge, and POSNER and KANNE,

Circuit Judges.

FLAUM, Chief Judge. In 1996 the United States sued

the Rueth Development Company and Harold Rueth

(collectively “Rueth”’) under the Clean Water Act, 33 U.S.C.

§ 1251 et seg. (“CWA” or “the Act”), for failure to obtain a

permit before discharging dredged or fill material into four

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acres of wetlands located in Dyer, Indiana. Rueth chose to

settle the suit and entered into a consent decree that required

him to restore the wetlands by specified dates. When he failed

to meet those deadlines, the government moved to enforce

the agreement, seeking over $6,750,000 in penalties. Rueth

responded by petitioning for modification or vacatur of the

consent decree based on the Supreme Court’s decision in

Solid Waste Agency of N. Cook County v. United States Army

Corps of Eng’rs, 531 U.S. 159 (2001) (““SWANCC”), which

he claimed was a material change in law affecting the decree’s

validity. The district court disagreed, granted the

government’s motion to enforce, and assessed penalties in

the amount of $4,018,500, and Rueth appeals. We affirm.

I. BACKGROUND

In April 1991 the Environmental Protection Agency

(“EPA”) issued an administrative compliance order under

33 U.S.C. § 1319(a), finding that Rueth had illegally

discharged dredged or fill material into wetlands located in

the Castlewood subdivision of southeastern Dyer. The fill

was specifically found to have been placed in wetlands

“adjacent to an unnamed tributary to Dyer Ditch, which flows

north to Hart Ditch, which flows north to the Little Calumet

River, which is a navigable water of the United States.”

The compliance order directed Rueth to cease all discharges

and restore the wetlands to their original condition, warning

that noncompliance could result in the assessment of

substantial penalties under the CWA.

Rueth then proceeded to apply for an after-the-fact permit

from the United States Army Corps of Engineers (“Corps”).

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The Corps declined to give approval, however, noting its

concern that Rueth was presenting his development plans in

a piecemeal fashion in an attempt to avoid a comprehensive

review of their cumulative environmental impact. The Corps

stated that it would reconsider its position if Rueth modified

his plans so that less than ten acres of wetlands were affected.

Rueth did not submit new development plans, reapply

for a permit, or undertake the restoration activities outlined

in the administrative compliance order. Instead, he filed a

complaint for equitable relief in the district court, claiming

that the government lacked regulatory jurisdiction over the

wetlands in the Castlewood subdivision. But because the

administrative compliance order was a pre-enforcement

action not subject to judicial review, the district court

dismissed the suit, and we affirmed, stating that Rueth could

contest jurisdiction if and when the EPA sought judicial or

administrative enforcement of penalties against him. Rueth

v. EPA, 13 F.3d 227, 230 (7th Cir. 1993) (“Rueth I”). We

also remarked in passing,

We acknowledge that our holding places Rueth

somewhat in limbo until such time as the EPA

seeks to enforce the compliance order or assess

administrative penalties. ... Responsibility for

this predicament does not fall entirely on the EPA

and the Corps of Engineers, as any reasonable and

experienced developer such as Rueth should

have known that the wetlands were potentially

subject to regulation. Perhaps Rueth is in its

present predicament because it attempted to short

cut and take an end-run around the permit

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requirement. . . . Ofcourse, Rueth now argues that

it had no idea the wetlands at the Castlewood

development were “waters of the United States”

{within the meaning of the CWA]. As our decision

in Hoffman Homes, Inc. v. EPA, 999 F.2d 256, 261

(7th Cir. 1993), makes clear, however, nearly all

wetlands fall within the jurisdiction of the CWA

since one test for whether the wetland affects

interstate commerce is whether migratory birds

use the wetland. Decisions such as Hoffman

Homes, give full effect to Congress’s intent to

make the Clean Water Act as far-reaching as the

Commerce Clause permits. On the other hand, it

is not inconceivable that the EPA or the Corps of

Engineers might completely overextend their

authority. In such a case, we suggest to those

agencies that we will not hesitate to intervene in

pre-enforcement activity, but this is not the case

as we are of the opinion that the wetland at issue

falls under the broad definition of “waters of the

United States” in Hoffman Homes.

Rueth I, 13 F.3d at 230-31 (citation omitted).

By November 1996 Rueth had still not performed the

tasks outlined in the administrative compliance order,

prompting the government to file this enforcement action.

The complaint asserted two bases for the government’s

regulatory jurisdiction: (1) adjacency—specifically, that the

Castlewood wetlands were “adjacent to waters which flow

into the Little Calumet River, an interstate stream, which

itself is a ‘water of the United States’ within the meaning of

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the CWA,” see 40 C.F.R. § 230.3(s)(7); and (2) effect on

interstate commerce, see id. § 230.3(s)(3). In addition to

injunctive relief, the complaint requested that the district

court assess a civil penalty under 33 U.S.C. § 1319(d) for

each day that Rueth was in violation of the CWA and the

administrative compliance order.

After over a year of negotiations, the parties entered into

a proposed consent decree, which the court then entered as a

final judgment in January 1999. In the consent decree,

Rueth agreed to perform a number of “milestone” tasks—

such as excavating fill, sealing and raising storm sewers,

and replacing wetland vegetation—by set deadlines.

The agreement also required Rueth to pay a $23,000 civil

penalty and set forth additional stipulated penalties that would

result from failure to meet “any milestone” according to the

specified timetable.

Rueth ultimately completed the wetland restoration at a

cost of around $100,000 but failed to perform a number of

the interim milestones in a timely fashion. Because of this

failure, the government moved to enforce the stipulated-

penalties provision of the consent decree, alleging that Rueth

had “in very large part” disregarded his obligations under

the agreement. For instance the government asserted that

Rueth was 67 days late in paying the $23,500 penalty, 579

days late in excavating the fill and performing the storm-

sewer tasks, and 158 days late in replacing the wetland

vegetation. The government sought a separate stipulated

penalty for each alleged violation of the agreement, resulting

in a grand total of $6,757,500.

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But before the district court could rule on the

government’s motion to enforce, Rueth moved under

Fed. R. Civ. P. 60(b)(5) for modification or vacatur of the

consent decree based on the Supreme Court’s decision in

SWANCC. Rueth claimed that SWANCC, which held that

“navigable waters” as defined in the CWA does not extend

to isolated intrastate waters solely because they are used as

habitat by migratory birds, made “legal what the decree was

designed to prevent,” thus rendering it unenforceable.

The district court disagreed, however. It concluded that

SWANCC did not affect the validity of the decree because

the government had not invoked the Migratory Bird Rule as

a basis for its jurisdiction but sought rather “to regulate the

[Castlewood] Site on the theory that it is an ‘adjacent

wetland.’” Then, the court made a factual finding that the

Castlewood wetlands were “adjacent” to navigable waters

because they have “an [effect] on flows to Dyer Ditch, and

ultimately the Little Calumet River,” which “is itself a

navigable waterway.” The court thus denied Rueth’s Rule

60(b)(5) motion, granted the government’s motion to enforce

the consent decree, and imposed penalties in the amount of

$4,018,500.

Rueth then moved under Rule 59(e) to alter or amend

the judgment, claiming that there was no evidence whatsoever

that the Castlewood wetlands were “adjacent” to a navigable

waterway. He also claimed for the first time that the language

of the consent decree did not allow for stipulated penalties

to be separately imposed for each uncompleted or delayed

“milestone” task. Though the district court denied the motion,

it agreed with Rueth that the question of “adjacency” was

still open to dispute and therefore vacated that portion of its

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earlier order. Nonetheless, the court held that, even assuming

the wetlands were isolated and not adjacent, Rueth was still

not entitled to modification or vacatur of the consent decree

because he waived his right to contest the government’s

regulatory jurisdiction by entering into the agreement.

The court also upheld its award of stipulated penalties, and

Rueth now appeals.

II. Discussion

Section 404(a) of the CWA grants the Corps authority to

issue permits “for the discharge of dredged or fill material

into the navigable waters at specified disposal sites.” 33

U.S.C. § 1344(a). “Navigable waters” is defined elsewhere

in the Act as “the waters of the United States, including the

territorial seas.” Jd. § 1362(7). The Corps has in turn defined

“waters of the United States” to include “waters such as

intrastate lakes, rivers, streams (including intermittent

streams), mudflats, sandflats, wetlands, sloughs, prairie

potholes, wet meadows, playa lakes, or natural ponds, the

use, degradation or destruction of which could affect

interstate or foreign commerce.” 40 C.F.R. § 230.3(s)(3)

(2003).

In SWANCC the Supreme Court held that § 230.3(s)(3),'

as Clarified by the Migratory Bird Rule, 51 Fed. Reg. 41217

(1986), exceeded the authority granted to the Corps under

§ 404(a) of the Act. The Migratory Bird Rule, which the Corps

1. Section 230.3(s)(3) was formerly codified at 33 C.F.R.

§ 328(a)(3) (1999). For simplicity we will cite to only § 230.3(s)(3)

throughout this opinion.

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issued in 1986 to clarify the reach of its jurisdiction, had

provided that § 404(a) extends to intrastate waters that

provide habitat for migratory birds. But the Court concluded

that nothing in the text of the statute indicated any

Congressional intent to extend the jurisdiction of the Corps

to “ponds that are not adjacent to open water.” SWANCC,

531 U.S. at 168. Instead, § 404(a)’s use of the word

“navigable” had “the import of showing . .. what Congress

had in mind as its authority for enacting the CWA: its

traditional jurisdiction over waters that were or had been

navigable in fact or which could reasonably be so made.”

Id. at 172.

The question before us now is what effect, if any,

SWANCC has on the validity of the consent decree in this

case. In moving to modify or vacate the decree, Rueth relied

on the third clause of Fed. R. Civ. P. 60(b)(5), which provides

that a court may relieve a party from a final judgment if “‘it is

no longer equitable that the judgment should have prospective

application.” To obtain relief under this provision, Rueth

bears the burden of showing “that a significant change in

circumstances warrants revision of the decree.” Rufo v.

Inmates of Suffolk County Jail, 502 U.S. 367, 383 (1992).

One instance where modification might be warranted is if

the “statutory or decisional law has changed to make legal

what the decree was designed to prevent.” Jd. at 388.

Rueth contends that that is what SWANCC did here.

Specifically, he asserts that SWANCC stripped the

government of power to regulate the Castlewood wetlands

because they are isolated and intrastate; therefore, the consent

decree “is void ab initio and should be rescinded.”

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The government, not surprisingly, believes otherwise.

Though the complaint did cite § 230.3(s)(3) as one basis for

regulatory jurisdiction, the government claims that SWANCC

is nonetheless irrelevant because the complaint did not

specifically invoke the Migratory Bird Rule; instead, the

alleged interstate-commerce nexus under § 230.3(s)(3)

“rested on other important ecological functions of the

wetland, such as water filtration, flood control, and wildlife

habitat.” Essentially, the government is urging us to give

SWANCC its narrowest reading possible—that use as habitat

by migratory birds is insufficient to bring purely isolated,

intrastate ponds within the Corps’ jurisdiction under the

CWA. Or, in other words, SWANCC did nothing more than

invalidate the Migratory Bird Rule. Section 230.3(s)(3),

however, extends the Corps’ jurisdiction to intrastate waters

for reasons other than those having to do with use by

migratory birds. For instance it includes waters that “are or

could be used by interstate or foreign travelers for recreational

or other purposes,” waters “[f]rom which fish or shellfish

are or could be taken and sold in interstate or foreign

commerce,” and waters that “are used or could be used for

industrial purposes by industries in interstate commerce.”

The government claims that SWANCC left these provisions

intact, whereas Rueth claims that SWANCC deprived the

Corps of all power to regulate any intrastate water based on

a nexus to interstate commerce. We conclude that they are

both partly right—the government because SWANCC does

not expressly make § 230.3(s)(3) illegal, and Rueth because

his reading ultimately may be the only logical extension of

the case. The Court’s concern with the Migratory Bird Rule

was that it conferred regulatory jurisdiction over waters that

were not actually or potentially “navigable”; § 230.3(s)(3)

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Appendix A

suffers from the same infirmity. For instance, that fish or

shellfish can be taken from a water and sold in interstate

commerce does not make that water any more “navigable”

than it would be if it were frequented by migratory birds.

The same holds true for intrastate waters that are used by

interstate travelers or for industrial purposes by industries in

interstate commerce.

But what effect SWANCC has on the Corps’ jurisdiction

under § 230.3(s)(3) is a question that we need not decide in

this case. For it is clear that SWANCC did not affect the law

regarding the government’s alternative asserted basis for

jurisdiction—adjacency under § 230.3(s)(7). The Corps’

adjacency jurisdiction is well-established; it was upheld by

the Supreme Court in United States v. Riverside Bayview

Homes, Inc., 474 U.S. 121 (1985), and was reaffirmed in

SWANCC. Recognizing this, Rueth offers a number of reasons

why we should find that the Corps lacks adjacency

jurisdiction here. First, he claims that the government has

offered no evidence that the Castlewood wetlands are actually

adjacent to navigable waters. But this is beside the point.

The government never had to present such evidence because

of the very fact that Rueth chose not to litigate the case. Rueth

also points out that the district court’s order denying his post-

judgment motion “assumed” that the wetlands are isolated

and not adjacent. He attaches too much significance to the

court’s assumption, however; the court proceeded on the

theory that the wetlands are not adjacent only because it

thought that Rueth would lose regardless. Finally, Rueth

asserts that the wetlands’ link to navigable waters is too

attenuated to establish adjacency, alleging that the wetlands

are “merely adjacent to a tertiary tributary of a navigable

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Appendix A

water (adjacent to an unnamed tributary of Dyer Ditch which

is a tributary of Hart Ditch which is a tributary of the Little

Calumet River).” But this simply raises the question of what

“adjacency” means, which SWANCC did not address at all.

Rueth, moreover, waived his right to litigate the issue when

he signed the consent decree. And further, it is not even

apparent that the necessary contiguity to a navigable water

is missing here. In Riverside Bayview Homes, the Court found

mere surface runoff into nearby navigable waters to be a

meaningful enough connection to give rise to the Corps’

adjacency jurisdiction. 474 U.S. at 134. And recently, in

United States v. Deaton, No. 02-1442, 2003 WL 21357305

(4th Cir. June 12, 2003), the Fourth Circuit upheld the Corps’

exercise of adjacency jurisdiction over a parcel of land whose

only connection to navigable waters was surface runoff that,

after a “winding, thirty-two-mile path,” emptied into the

Chesapeake Bay.’

Despite the government’s assertion of adjacency

jurisdiction, Rueth seems to suggest that it would nonetheless

be manifestly unfair to hold him to the terms of the consent

2. As the court described it, the surface runoff drained into a

roadside ditch, which in turn “drain[{ed] into a culvert under Morris

Leonard Road. On the other side of the road, the culvert drain[ed]

into another ditch, known as the John Adkins Prong of Perdue Creek.

Perdue Creek flows into Beaverdam Creek, a natural watercourse

with several dams and ponds. Beaverdam Creek is a direct tributary

of the Wicomico river, which is navigable. Beaverdam Creek empties

into the Wicomico River about eight miles from the [defendants’

property. About twenty-five river miles further downstream, the

Wicomico River flows into the Chesapeake Bay, a vast body of

navigable water.” /d., 2003 WL 21357305, at *2.

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Appendix A

decree because, at the time he settled the case, the law was

well-established that the Corps could exercise jurisdiction

over isolated intrastate waters. As Rueth points out, we told

him in his first appeal that “nearly all wetlands fall within

the jurisdiction of the CWA since one test for whether the

wetland affects interstate commerce is whether migratory

birds use the wetland.” Rueth J, 13 F.3d at 231 (citing

Hoffman Homes, Inc. v. EPA, 999 F.2d 256, 261 (7th Cir.

1993)). This statement is obviously no longer accurate after

SWANCC, but regardless, we fail to see how it has any effect

on the validity of the decree. Back when the EPA filed its

complaint in 1996, Rueth was faced with a choice: he could

either contest the government’s jurisdiction or forego the

costs and settle the case. Having reasonably concluded that

his chances of succeeding on the jurisdictional challenge were

not good, Rueth chose the latter course. The defendants in

SWANCC chose the former. Now, Rueth seeks a free ride on

the defendants’ success in SWANCC, but the mere fact that

the Supreme Court has cast doubt on one of the complaint’s

legal bases is not a ground on which to reopen the case.

See United States v. Krilich, 303 F.3d 784, 792 (7th Cir. 2002)

(“Krilich IIT’); Cincinnati Ins. Co. v. Flanders Elec. Motor

Serv., Inc., 131 F.3d 625, 628-29 (7th Cir. 1997). As we stated

in Krilich III, which also involved a Rule 60(b)(5) motion to

_ vacate a consent decree based on SWANCC,

If a party believes that the waters at issue on his

own property are not properly subject to the EPA’s

authority, whether under the rationale of Hoffman

Homes I, SWANCC or under some other theory,

he should not stipulate otherwise. But that is

exactly what Krilich did, to his continued dismay.

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He expressly agreed that certain waters on his

property constituted “waters of the United States,”

subject to regulation by the EPA. Like most parties

that enter into a settlement or plea agreement, he

presumably made a tactical! decision that the terms

of the Consent Decree were more favorable than

the costs or risks of continued litigation.

Accordingly, we conclude that SWANCC effected

no relevant change in decisional law such that the

district court should have modified the Consent

Decree. Nor does SWANCC establish that the

EPA’s entry into and continued enforcement of the

Consent Decree are ultra vires acts. “To hold that

a Clarification in the law automatically opens the

door for relitigation of the merits of every affected

consent decree would undermine the finality of

such agreements and could serve as a disincentive

to negotiation of settlements in . . . litigation.”

Id. (quoting Rufo, 502 U.S. at 389).

Rueth spends much of his brief explaining how Krilich

III is distinguishable from this case, but ultimately the

distinction comes down to this: in Krilich III the defendant

had conceded that there was some basis for the Corps’

jurisdiction other than effect on interstate commerce, whereas

here, Rueth conceded only that there was some basis for

jurisdiction. But this is a distinction without a difference.

Even assuming Rueth is right that SWANCC made illegal the

government’s assertion of jurisdiction under § 230(s)(3),

if the case is reopened, the parties would still have to litigate

whether the government has adjacency jurisdiction under

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Appendix A

§ 230(s)(7). Six years ago, however, Rueth made the

conscious decision, given the uncertainties of litigation, not

to contest that issue. It would render the consent decree

worthless to allow him to do so now. See Rufo, 502 U.S. at

389.3

So the district court was right not to modify or vacate

the consent decree, but Rueth maintains that, even so, the

court erred for several reasons in calculating the stipulated

penalties. He first contends that the language of the decree

does not support the imposition of cumulative stipulated

penalties for each uncompleted “milestone” task; rather,

according to Rueth’s reading, the court should have imposed

penalties based on days of noncompliance regardless of the

number of violations, which would have reduced the total

penalty to less than $1.5 million. Unfortunately for Rueth,

he has waived this claim by raising it for the first time in his

Rule 59(e) motion.* Anderson v. Flexel, Inc., 47 F.3d 243,

247 (7th Cir. 1995). The government made clear in its motion

to enforce that it was seeking a separate penalty for each

violation of the decree. Yet in his opposition to the motion,

Rueth did not argue that the stipulated-penalty provision was

unclear on its face but asserted only that the penalties sought

were “unconscionable and unenforceable” because they “bear

3. Rueth might have an additional problem in that the relief he

seeks—mainly, to be excused from paying the stipulated penalties

that accrued as a result of his missing the deadlines set forth in the

decree— may not be “prospective” in nature. Fed. R. Civ. P. 60(b)(5).

There is no need for us to address this issue, however.

4. Notably, the district court did not even mention the claim in

its order denying Rueth’s motion. .

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Appendix A

no rational relationship to the potential harm which the

plaintiff could have reasonably foreseen at the time it

prepared the Consent Decree, and because the size of the

penalties is grossly disproportionate to the degree of harm

to the EPA or the environment resulting from the alleged

delays.” Not until his Rule 59(e) motion did Rueth raise any

question regarding the proper construction of the stipulated-

penalty provision. Further, even had Rueth not waived his

claim, we find the government’s interpretation of the decree .

to be the more reasonable one in any event. We agree with

Rueth that the stipulated-penalty provision is facially

ambiguous, so in order to resolve the ambiguity we must

“look at the evil which the decree was designed to rectify.”

Goluba v. Sch. Dist. of Ripon, 45 F.3d 1035, 1038 (7th Cir.

1995) (quotations omitted). The clear intent of this decree

was to require Rueth to restore the wetlands by performing

Six discrete milestone tasks in a relatively short (eleven-

month) timeframe. Rueth knew that he had to comply with

all six milestones in order to be in compliance with the CWA.

Yet if he is right that the stipulated penalties accrue only by

day of violation rather than per violation, there would be no

incentive for him to complete any of the other five tasks if

he is in violation of one. For this reason we cannot sustain

Rueth’s interpretation of the decree. To do so would render

the number of violations irrelevant to the total penalty, which

would in turn contravene the intent of the parties at the time

the contract was made.

Rueth’s next argument is that the district court erred by

failing to hold a hearing to determine whether the EPA had

consented to the delays in completing the storm-sewer tasks.

The consent decree, however, has a force majeure provision,

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which states that untimely performance would only be

excused if Rueth provided a written request to the EPA. Rueth

did not present any evidence that he did so. Thus, pursuant

to the express terms of the decree, Rueth waived his right to

obtain an extension of the deadlines, and so the court did not

err in refusing to hear evidence on his claim that the decree

had been orally modified. See United States v. Alshabkhoun,

277 F.3d 930, 936 (7th Cir. 2002); United States v. Krilich,

126 F.3d 1035, 1036-37 (7th Cir. 1997).

Rueth also contends that, before the court imposed the

penalty, it should have considered the statutory criteria (such

as seriousness of the violation and ability to pay) provided

in the CWA. 33 U.S.C. § 1319(d). His argument is without

support. Rueth negotiated and freely entered into the consent

decree and is therefore bound by its terms, including those

setting forth penalties, see Alshabkhoun, 277 F.3d at 935;

the statutory factors no longer have any relevance. Likewise

meritless is Rueth’s argument that the penalties violate due

process. Their apparent severity is due to the fact that Rueth

was so negligent in complying with the decree that he himself

negotiated; indeed, he was up to 579 days late in completing

some of the milestone tasks. Given these circumstances we

cannot say that the penalty amount is unreasonable, especially

considering that it is but a small fraction of the maximum

penalty that could have been imposed under the CWA.

See id.

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III. CONCLUSION

The district court did not err in denying Rule 60(b)(5)

or 59(e) relief, and so the judgment is AFFIRMED.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

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APPENDIX B — ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE NORTHERN DISTRICT

OF INDIANA, HAMMOND DIVISION

DATED FEBRUARY 21, 2002

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

HAMMOND DIVISION

No. 2:96 cv 540

UNITED STATES OF AMERICA

V.

RUETH DEVELOPMENT COMPANY,

AND HAROLD G. RUETH

ORDER

Presently before the court for resolution is “Defendants

Motion to Alter or Amend Judgment,” filed on October 11,

2001. Defendants ask this court to rule that (1) wetland 6 is

an “isolated wetland” for purposes of the Clean Water Act

(“CWA”), and (2) the Environmental Protection Agency

(“EPA”) “lacks jurisdiction to seek to enforce the Consent

Decree.” (Mot. at 1.) For the following reasons, the court

VACATES IN PART its September 25, 2001 Order, and

DENIES Defendants’ Rule 59(e) motion.

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Appendix B

I. BACKGROUND'

On November 1, 1996, EPA filed a civil complaint

alleging that Defendants violated CWA, by causing unlawful

dredging and filling at two parcels in the Castlewood

Development, located in southeastern Dyer, Indiana (“Site”

or “Castlewood”). Instead of proceeding to trial, Defendants

and EPA settled the suit. The settlement was memorialized

in a Consent Decree. Pursuant to Section XII of the Decree,

the Department of Justice solicited public comment on the

proposed Consent Decree. See Notice of Lodging of Consent

Decree Pursuant to the Clean Water Act, 63 Fed. Reg.

at 60,024 (Nov. 6, 1998). No comments were received.

This court subsequently entered the Consent Decree on

January 26, 1999. It required Defendants to (1) cease unlawful

discharges; (2) restore the property’s wetland in accordance

with the “Castlewood Development Wetland Restoration

Plan” within the agreed-to-timeline; and (3) “pay a civil

penalty of $23,500, payable within thirty (30) days of the

entry of this Consent Decree.”?

On the belief Defendants had failed to fully perform their

obligations, EPA subsequently moved to enforce the Consent

Decree. See Robert V. Percival, The Bounds of Consent:

Consent Decrees, Settlements and Federal Environmental

Policy Making, 1987 U. Cui. LEGAL F. 327, available at WL

1987 UCHILF 327, at 4 (“Once the agreement is embodied

in a consent decree, the government may seek relief for a

1. The factual and procedural background are more fully set

forth in the court’s September 25, 2001 Order.

2. Consent Decree at § 17.

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Appendix B

breach of the agreement directly from the court without filing

a new lawsuit.”). On September 25, 2001, this court granted

EPA’s motion to enforce the Consent Decree, and lodged a

judgment in favor of EPA (and against Defendants) for

stipulated penalties. On October 11, 2001, Defendants timely

filed a motion pursuant to Fep.R.Civ.P. 59(e), arguing the

court erroneously awarded the judgment for stipulated

penalties because (1) this court drew the wrong factual

conclusion about the adjacency of wetland 6 (or, in the

alternative, that the court should have conducted a hearing

to receive ecological and hydological evidence on the issue),

and (2) EPA has no jurisdiction to seek enforcement of the

Consent Decree.

II. LEGAL STANDARD

A party may file a “motion to alter or amend a judgment”

within ten days after the entry of such judgment. Fep.R.Crv.P.

59(e). The motion must set forth, with “reasonable

specification,” the grounds upon which the moving party

seeks relief. Zalano v. Northwestern Med. Faculty Fdn., Inc.,

273 F.3d 757, 760 (7th Cir.2001) (mandating a minimum of

specificity to trigger Fep.R.Civ.P. 59(e) review); Martinez v.

Trainor, 556 F.2d 818, 819-20 (7th Cir.1977). “A party may

not introduce evidence or make arguments in a Rule 59

motion that could or should have been presented to the court

prior to judgment.” United States v. 47 West 644 Route 38,

Maple Park, Iil., 190 F.3d 781, 783 (7th Cir.1999); see also

Caisse Nationale De Credit Agricole v. CBI Indus., Inc., 90

F.3d 1264, 1270 (7th Cir.1996); LB Credit Corp. v. Resolution

Trust Corp., 49 F.3d 1263, 1267 (7th Cir.1995). “A Rule 59(e)

motion may only be granted if there has been a mistake of

2la

Appendix B

law or fact or if there is newly discovered evidence not

previously available.” Gendron v. United States, 154 F.3d

672, 675 (7th Cir.1998); see Figgie Int'l. Inc. v. Miller, 966

F.2d 1178, 1180 (7th Cir.1992).

Ill. DEFENDANTS’ CONTENTIONS

In their jointly-filed motion, Defendants make two

arguments. First, they assert the court prematurely concluded

wetland 6 is an “adjacent wetland” and subject to the EPA’s

regulatory jurisdiction under the CWA. According to

Defendants, the court should instead find that the Site is

situated upon an “isolated wetland” and therefore beyond

the regulatory reach of the CWA. Alternatively, Defendants

argue this court should receive expert ecological and

hydrological testimony on the issue of whether the Site sits

upon an “isolated wetland.” Under the circumstances, a

Rule 59(e) motion appears to be the proper procedural device

to pursue the remedy Defendants seek. Second, Defendants

argue that EPA lacks jurisdiction to seek enforcement of the

Consent Decree entered by this court. Defendants maintain

that intervening United States Supreme Court case law has

stripped EPA of regulatory jurisdiction over the Site.

According to Defendants, EPA is therefore powerless to

petition this court to assess stipulated penalties as provided

in the Consent Decree. The court will address each argument

in turn.

Ga |

22a

Appendix B

A. Wetland 6 is an “isolated wetland”

First, Defendants maintain the Site does not contain an

“adjacent wetland.” See 33 C.F.R. § 328.3(b) (defining

“wetlands”) & (c) (defining “adjacent”). As previously

stated, the court, in its September 25, 2001 order, concluded

otherwise. In so doing, the court referred to EPA’s

memorandum in support of its motion to enforce the consent

decree, particularly Exhibit A thereto, which purports to be

“Consent Decree, United States v. Rueth Development Co.,

Civil Action Number 2:96CV-540-JM, entered January 26,

1999.” (Mem. in Supp. of Motion to Enforce Consent Decree,

at Index to Exhibits (emphasis in original) (“Memo In

Support”)) According to this Index of Exhibits, Tab 1

contained the Consent Decree, and only the Consent Decree.

The court then reviewed the obligations Defendants had

agreed to undertake as a result of the Consent Decree.

One provision required that “Defendants shall conduct and

complete the ‘Castlewood Development Wetland Restoration

Plan’ which is attached to this Consent Decree as Exhibit

1.” (Consent Decree at 9 16.) The parties also agreed

“Tt}]he ‘Castlewood Development Wetland Restoration Plan’

shall be an enforceable obligation of this Consent Decree.”

(Id. at J 16.c.) The court, eager to peruse the contents of the

“Castlewood Development Wetland Restoration Plan,” turned

to the rear of Tab 1. Two pages after the signature page for

the presiding district judge (i.e., the undersigned) appears a

page with the following printed upon it: EXHIBIT 1.

(emphasis in original [hereinafter “Tab 1/Exhibit 1”] )

~The court understood this page to signal the beginning of

the “Castlewood Development Wetland Restoration Plan.”

In other words, it was assumed (albeit subliminally) that on

23a

Appendix B

the next page would commence the contents of the

“Castlewood Development Wetland Restoration Plan.”

The first page of what is Tab 1/Exhibit 1 of EPA’s Memo

in Support (and what simultaneously purports to be the

“Castlewood Development Wetland Restoration Plan”)

contains the following statement: “Castlewood is an existing

residential subdivision located in Dyer, Indiana, south of U.S.

30 and just west of the Schereville town line. . . . Within this

proposed development area is a wetland encompassing

approximately 7.3 acres. The existence of this wetland

necessitates this assessment.” (emphasis added) The fourth

paragraph on that first page states: “The proposed

development area was naturally undulating but has been

modified by past sand and/or gravel mining activities.

Therefore, some areas are scraped and others contain

indiscriminate spoil piles. Jn the center of the property is

a large wetland of about 7.3 acres.” (emphasis added)

The court further proceeded to study the “exhibit” and noted

the following two sentences:

The topographic map of the area (St.John, Indiana)

shows that the natural drainage is to the north to

Dyer Ditch, then to Hart Ditch and the Little

Calumet River. Shallow wetlands existed along

this natural drainage, but the spoil piles

interrupted that water flow and dammed the valley

to create the deeper wetland.

(Tab 1/Exhibit 1 at 10.) Continuing with its review of

the document, the court took special note of two portions

printed within the section entitled “Discussion and

i) Lae

24a

Appendix B

Recommendations.” First, this section provided the following

conclusion: “The wetland on the Castlewood property

provides habitat for numerous wildlife species. /t also has

an affect on flows to Dyer Ditch, and ultimately the Little

Calumet River.” (Tab 1/Exhibit 1 at 15 (emphasis added).)

The “Discussion and Recommendations” section further

determined that “[t]he Castlewood wetland is under the

jurisdiction of the U.S. Army Corps of Engineers under

Section 404 of the Clean Water Act of 1972.” (/d. at 16.)

This document clearly indicates that one wetland is present

on the Site, water molecules that collect in the wetland

ultimately come in contact with water molecules from the

Little Calumet River,’ and that the wetland is subject to

federal regulatory jurisdiction pursuant to CWA § 404.

Armed with the ecological and hydological conclusions

embodied in Tab 1/Exhibit 1, the court then referred back to

the body of the Consent Decree proper. Since the court was

lead to believe that the contents of Tab 1/Exhibit 1 were the

“Castlewood Development Wetland Restoration Plan,”

(Consent Decree at 3.), and that the “Castlewood

Development Wetland Restoration Plan,” is “an enforceable

obligation,” (id. at J 16.c.), this court concluded that the set

of ecological and hyrdological propositions contained in Tab

1/Exhibit 1 were previously agreed upon. Proceeding under

the assumption EPA and Defendants had both subscribed to

these ecological and hydrological findings, the court found

that no factual dispute could possibly exist on issues relating

to the wetland. Based upon what the court perceived to be

3. The court took judicial notice of the fact that the Little

Calumet River is a navigable waterway. See Fep.R.Evip. 201(c)

(“A court may take judicial notice, whether requested or not.”).

Leh gated iA GIRL Det Te CEA A SIRS AES Oto

25a

Appendix B

mutual understandings, it was concluded that the wetland

present upon the Site is an “adjacent” (and not an isolated)

wetland for purposes of CWA. (See Sept. 25, 2001 Order at

4-5 (citing Tab 1/Exhibit 1).) This precluded Defendants from

establishing what they believe is vital to their case, namely

that the wetland that is the subject of this litigation is not the

kind of ecological system that is within the regulatory

purview of CWA.

In Defendants’ memorandum in support of their Rule

59(e) motion, they inform the court that it “misinterpreted

Exhibit 1 to the Consent Decree, and ignored disputed

issues of fact.” (Mem. in Supp. of Mot. at 4.) Neither of these

characterizations is entirely true, but prompted the court to

investigate the source of Defendants’ discontent. First, the

court did not ignore a disputed factual question because, as

mentioned supra, based upon the documents the parties

presented, there appeared to be no material fact in dispute.

Second, the court did not misinterpret “Exhibit 1 to the

Consent Decree.” The court merely arrived at its decision by

reference to the documents submitted by the parties, working

under the assumption the documents were indeed what they

purported to be. In fact, upon (another) review of that

document, it is clear the court properly interpreted its

contents.

The element of truth to which the court referred comes

in when a subsequent review of EPA’s submission reveals

that it perpetrated a “bait and switch” of sorts. The document

upon which this court so heavily relied, “Tab 1/Exhibit 1” is

not what it purports to be. In the place where the “Castlewood

Development Wetland Restoration Plan” was supposed to

26a

Appendix B

be (i.e., right after the page with the symbols “EXHIBIT 1”

printed upon it) was a report prepared by Elizabeth

Secora McCloskey (“McCloskey Report”).* The bona fide

“Castlewood Development Wetland Restoration Plan”

appears nowhere in the EPA’s package of exhibits annexed

to its Memo in Support of the Motion to Enforce the

Decree. That is no small accomplishment: EPA annexed

seventeen exhibits, not one of them was the “Castlewood

Development Wetland Restoration Plan.” Failing to-include

the “Castlewood Development Wetland Restoration Plan” as

the real Exhibit 1 to the Consent Decree was the “bait”

half of the operation, inserting the McCloskey Report, was

the “switch.” Surprisingly, in the ten months and roughly

half-dozen filings between EPA’s tendering of the “bait and

switch” exhibit and this court’s September 25, 2001 Order,

Defendants failed to provide a true, accurate, and complete

copy of the Consent Decree (and proper exhibits thereto),

and/or bring the court’s attention to the fact that the Consent

Decree annexed to EPA’s memorandum is very misleading.

In its response to this Rule 59(e) motion, EPA recognizes

this mistake. (Resp. at 5, fn.2 (“[The McCloskey Report]

4. Defendants drove this point home in their memorandum.

The Consent Decree in this case is attached as Exhibit 1

to the Plaintiff’s “Memorandum in Support of United

States’ Motion to Enforce the Consent Decree.” Exhibit

1 to the Decree, attached by the government, is entitled

“Environmental Assessment, Castlewood Edition, Dyer,

Indiana,” dated February 21, 1990, prepared by Elizabeth

Secora McCloskey.

(Mem. in Supp. of Rule 59(e) Mot. at 3 (emphasis added).)

27a

Appendix B

was incorrectly attached as Exhibit 1 to the Consent Decree

... Ms. McCloskey’s report should have been attached as

Exhibit 1 to the Declaration of Gregory T. Carlson.”).)

As aresult, Defendants have clearly met their burden of

demonstrating to the court that the parties never achieved

mutual assent on the contents of the McCloskey Report,

which undergirds this court’s previous finding that the

wetland at issue in this litigation is an “adjacent wetland” as

that phrase is used in CWA jurisprudence. This court,

therefore, VACATES the portion of its September 25, 2001

Order finding of an “adjacent wetland” upon the Site.

B. Whether EPA lacks jurisdiction to seek

to enforce the Consent Decree

Even assuming Defendants can show that wetland 6 is

an “isolated wetland” for purposes of CWA, the inquiry does

not end. Such a finding does not automatically undercut the

validity of the Consent Decree, or the supplemental judgment

resulting from this court’s grant of EPA’s motion to

enforce the Consent Decree. Rather, Defendants must now

demonstrate that, as a result of wetland 6 being an “isolated

wetland,” EPA “lacks jurisdiction to seek to enforce the

Consent Decree.” (Def. Mem. in Supp. of Mot. at 19.)

Defendants jurisdictional argument flows from the United

States Supreme Court decision in Solid Waste Agency of

Northern Cook County v. Army Corps of Engineers, 121 S.Ct.

675 (2001) (5-4 decision) (“SWANCC’”).

In SWANCC, a group of suburban Chicago municipalities

decided to purchase some real property located in Cook and

ae

28a

Appendix B

Kane counties. See id. at 678. The owner at the time, Chicago

Gravel Company, had previously used the parcel for sand

and gravel pit mining operations, but ceased those operations

there about 1960. See id. In the intervening decades, “the

old mining site eventually gave way to a successful stage

forest, with its remnant excavation trenches evolving into a

scattering of permanent and seasonal ponds of varying size

and depth.” Jd. (parentheticals omitted). As a result of the

presence of these bodies of water, the defendants contacted

the Army Corps of Engineers (“ACOE”) and inquired whether

these man-made bodies were subject to federal regulation

under CWA, and if so, whether “a federal landfill permit was

required.” Jd. ACOE eventually asserted jurisdiction because

migratory birds were observed at the site. See id. In common

parlance, this is the Migratory Bird Rule. See 51 Fed. Reg.

41,217. Notwithstanding its diligent attempts to secure the

applicable CWA permit, ACOE refused to grant one.

The municipalities then filed suit in district court, pursuant

to the Administrative Procedures Act, 5 U.S.C. § 701 et seq.,

“challenging both the [ACOE] jurisdiction over the site and

the merits of its denial of the . . . permit.” Jd. at 679. ACOE

secured a summary judgment in its favor on the jurisdictional

issue and the municipalities abandoned their challenge to

the denial of the permit. See id. The Seventh Circuit affirmed,

rejecting the position that ACOE “had exceeded their

statutory authority in interpreting the CWA to cover

nonnavigable, isolated, intrastate waters based upon the

presence of migratory birds.” Jd. The Supreme Court granted

certiorari.

The Supreme Court, in its five-to-four decision, reversed

the Seventh Circuit. The Court determined the promulgation

29a

Appendix B

of the Migratory Bird Rule, was beyond the authority Congress

had bestowed upon ACOE. See id. at 684. Since the Migratory

Bird Rule was the sole basis upon which ACOE asserted

regulaiory jurisdiction over the real property at issue, the Court

ruled the municipalities were entitled to judgment as a matter

of law.

Defendants argument based on SWANCC is fairly

straightforward. They assert that just like the real property in

SWANCC, the Site’s wetland 6 is not an “adjacent wetland,”

and therefore no CWA jurisdiction exists. According to

Defendants, this means the court should alter the supplemental

judgment entered in this case on September 25, 2001. A fair

reading of SWANCC, however, indicates it is sufficiently

distinguishable, and does not form a basis for Rule 59(e) relief.

There is a fatal difference in procedural posture. When faced

with the prospect of regulation under CWA § 404(a), the

municipalities in SWANCC could have acquiesced, settled with

ACOE, and developed the real property consistent with ACOE

specifications. Instead, the municipalities made a rational

determination that the expected benefits derived from fully

litigating the jurisdictional issue outweighed the expected

detriment. From the municipalities’ perspective, it “made sense”

to litigate rather than forfeit the right to contest the jurisdictional

issue and come to a negotiated settlement. See Percival, supra,

at *8 (“Parties ordinarily can be expected to settle a lawsuit

only if the terms of the settlement are more favorable than the

expected outcome of a trial discounted by the additional

costs of continuing the litigation.” (citing William M. Landes,

An Economic Analysis of the Courts, 14 J.L. & Econ. 61, 66-69

(1971))).

30a

Appendix B

Defendants charted a different course, which naturally,

yielded different results. To fully appreciate the difference

in procedural posture between SWANCC and this case

requires a return to January 1991. At that time ACOE notified

Defendants “that its activities at the Castlewood site were

resulting in the unauthorized discharge of fill materials into

wetlands.” Rueth v. EPA, Civ. A. No. H91-152, 1992 WL

560944 at *1 (N.D.Ind. Nov. 24, 1992) (Lozano, J.), aff'd,

13 F.3d 227 (7th Cir.1993). Three months later, EPA issued

an administrative order, indicating Defendants violated the

anti-dumping provisions of the CWA. EPA also mandated a

restoration of the wetland to its previous condition. See id.

Less than one month after the administrative order issued,

Defendants filed suit requesting a declaration that ACOE

“does not have jurisdiction over the property at issue.” Jd.

Judge Lozano dismissed the action for lack of subject matter

jurisdiction, holding that administrative agency orders “are

not reviewable until the enforcement stage.” Jd. at *2. Judge

Lozano also provided guidance on the availability of a federal

judicial forum.

Developers, when confronted with the [ACOE]

preliminary determination of jurisdiction over

land, may react in two ways. They may submit to

the administrative permitting process and

subsequently, through the Administrative

Procedure Act, 5 U.S.C. § 704, obtain judicial

review of a permitting decision (a final agency

action) under the arbitrary and capricious

standard. Or, they may ignore the agency and risk

compliance orders followed by enforcement

penalty proceedings, and obtain de novo review

3la

Appendix B

in district court. Either of these two options, in

any event, affords the developer his or her day in

court.

Id. at *3 (citation to Banks v. Page, 768 F.Supp. 809 (S.D.Fla.

1991) omitted). Dissatisfied with this outcome, Defendants

appealed, and (as indicated by the citation to the district court

opinion, supra ) the Seventh Circuit affirmed. In so doing,

the panel made some observations bearing on the issue

presently before this court.

We acknowledge that our holding places Rueth

somewhat in limbo until such time as the EPA

seeks to enforce the compliance order or assess

administrative penalties. In the interim, we are

cognizant of the fact that Rueth might conceivably

encounter some problems, such as securing bank

loans or obtaining title insurance. Responsibility

for this predicament does not fall entirely on the

EPA and the [ACOE], as any reasonable and

experienced developer such as Rueth should have

known that the wetlands were potentially subject

to regulation. Perhaps Rueth is in its present

predicament because it attempted to short cut and

take an end-run around the permit requirement.

Indeed, the prudent course for any developer is to

secure the necessary permits prior to commencing

construction. This is what the Clean Water Act

mandates in [33 U.S.C.}] § 1344(a) when it

requires developers to obtain permits prior to

filling wetlands. Of course, Rueth now argues that

it had no idea the wetlands at the Castlewood

32a

Appendix B

development were “waters of the United States.”

As our decision in Hoffman Homes, Inc. v. EPA,

999 F.2d 256, 261 (7th Cir.1993), makes clear,

however, nearly all wetlands fall within the

jurisdiction of the CWA since one test for whether

the wetland affects interstate commerce is whether

migratory birds use the wetland. Jd. Decisions

such as Hoffman Homes, give full effect to

Congress’s intent to make the Clean Water Act as

far-reaching as the Commerce Clause permits. On

the other hand, it is not inconceivable that the EPA

or the [ACOE] might completely overextend their

authority. In such a case, we suggest to those

agencies that we will not hesitate to intervene in

pre-enforcement activity, but this is not the case

as we are of the opinion that the wetland at issue

falls under the broad definition of “waters of the

United States” in Hoffman Homes.

Rueth, 13 F.3d at 230-31 (dicta). Based upon this round of

litigation, a rational business manager in Defendants’ position

would have impounded the following information into the

operating calculus-of the firm: (1) that Defendants would

have a federal judicial forum available to contest the

jurisdictional issue (either offensively, in a suit against

EPA pursuant to the Administrative Procedures Act;* or

defensively, in an action brought by EPA against Defendants

for violations of CWA); and (2) that based upon the law of

this circuit, Defendants’ chances of succeeding with the

jurisdictional challenge were slim.

5. This was the procedural device employed by the

municipalities in SWANCC. 121 S.Ct. at 679.

=

33a

Appendix B

On November 1, 1996, EPA filed a civil complaint

alleging Defendants violated CWA sections 301(a) and 404.

At that moment, Defendants were faced with a choice.

Defendants could have contested the EPA’s regulatory

jurisdiction, thereby encountering certain risks. First, based

upon the Seventh Circuit’s dicta, Defendants chances of

succeeding were not good. Second, the costs (in attorneys’

fees, expert witnesses, discovery, etc.) of pursuing the

jurisdictional issue would be substantial. Last, contesting

EPA’s jurisdiction could have thwarted attempts to negotiate

a settlement. The municipalities in SWANCC chose this risky

route, whereas Defendants, approached the probiem in a more

risk averse manner. They agreed to settle the litigation (and

have that settlement embodied in the Consent Decree).°

6. Presumably, Defendants could have reserved the right to contest

EPA’s jurisdiction over the Site. Alternatively, Defendants could have

negotiated a provision in the Consent Decree allocating rights and

obligations of the parties in the event case law in this circuit changed.

This latter approach was taken by the developer in United States v.

Krilich, 152 F.Supp.2d 983 (N.D.IIl. 2001), appeal docketed, No. 01-

2746 (7th Cir. July 3, 2001). In the Krilich consent decree, the parties

made the following agreement:

20A. The Defendants shall continue to treat wetland

and open water areas depicted on Exhibit | as waters of

the United States until the mandate issues in Hoffman

Homes, Inc. v. EPA, 961 F.2d 1310 (7th Cir.1992) and until

proceedings related to any appeal, petition for certiorari,

or remand are completed. Following completion of these

proceedings, unless pertinent portions of the Seventh

Circuit’s April 20, 1992 decision are reversed, Exhibit 1

areas W2A, W2B, W3, W5B, and W9 shall be excluded

from the obligations imposed in Paragraph 17.

Id. at 990.

34a

Appendix B

This decision is perfectly understandable. Defendants felt

the jurisdictional issue was a “loser,”’ and the costs of what

appeared to be protracted litigation would be prohibitive.

Cf. Percival, supra at *2 (“Joint gains from settlement are

possible because settlements save the parties the expense of

further litigation.”). Defendants decision, however, was not

without costs of its own. First (and fatally for purposes of

this motion), Defendants waived certain rights. See generally

id. at *2 (“Each party gives up something it might have won

had the litigation continued.”). “Waiver is the intentional

relinquishment or abandonment of a known right.” United

States v. Williams, 272 F.3d 845, 854 (7th Cir. 2001); see

also United States v. Olano, 507 U.S. 725, 733 (1993). By

assenting to settlement in this action,* Defendants waived,

for example, the right to contest the EPA’s regulatory

jurisdiction, which would have been an element of the EPA’s

substantive claim. See United States v. Krilich, 209 F.3d 968,

972 (7th Cir. 2000) (“[T]he interstate connection, i.e. that

the waters involved were ‘waters of the United States,’ is

merely an element of the United States’ Clean Water Act case

under section 301.”), cert. denied, 531 U.S. 992 (2000);

see also United States v. Wilson, 133 F.3d 251, 264 (4th Cir.

1997) (indicating proof of interstate nexus is an element of

criminal liability under CWA); United States v. Ahmad, 101

F.3d 386, 391 (Sth Cir. 1996) (recognizing the existence of

“purely jurisdictional elements’’).

7. But see SWANCC, 121 S.Ct. at 684 (reversing Seventh

Circuit).

8. See Consent Decree at 4 5 (“This Consent Decree shall

constitute a complete and final settlement of all civil claims against

the Defendants in connection with Defendants’ alleged violations of

the CWA as set forth in the Complaint.”).

35a

Appendix B

Moreover, a consent decree “is an agreement that the

parties desire and expect will be reflected in, and be

enforceable as, a judicial decree that is subject to the rules

generally applicable to other judgments and decrees.”

Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, 378

(1992) (emphasis added). In this case, EPA moved to enforce

the judgment entered by way of the Consent Decree. As a result

of EPA’s motion, this court lodged a supplemental judgment in

favor of EPA. Defendants, ‘in their Rule 59(e) motion, seek to

alter the latter of the two judgments entered in this cause, but

since the latter judgment is merely the result of exercising rights

contained in the earlier judgment, Defendants must also attack

the former judgment (or more specifically, rights therein

allocated to EPA), which is exactly how Defendants cast their

argument. (See Rule 59(e) Mot. at 1 (EPA “lacks jurisdiction to

seek to enforce the Consent Decree.” (emphasis added)).)

Even assuming the wetland at issue in this litigation is beyond

the regulatory reach of EPA (on account of its ecological

“isolation’’),? and further assuming EPA has no power to enter

into the agreement that eventually was entered as a judgment

by this court, Defendants still can not obtain Rule 59(e) relief

because “(t]he fact that a party to a consent judgment lacked

av‘hority to consent (as defendants contend is true of the [EPA]

in light of SWANCC) does not void the judgment itself.” Krilich,

152 F.Supp.2d at 991 (citations omitted). “A judgment is void

if it is without subject matter jurisdiction, there was no personal

jurisdiction over a party, or the judgment was entered without

due process of law.” Jd. On this Rule 59(e) motion, Defendants

contest not the subject matter jurisdiction of this court, but rather

9. But see SWANCC, 121 S.Ct. at 693-96 (Stevens, J., dissenting)

(arguing migratory birds act as the “adjacency factor” linking

otherwise isolated wetlands).

36a

Appendix B

EPA’s regulatory reach, a contention which does not render void

the judgments entered in this action. The Consent Decree

remains, therefore, what it has always been: a valid and

enforceable judgment. (See Consent Decree at | 37 (“Upon its

entry by this Court, this Consent Decree shall have the force

and effect of a final judgment.”).)

One can think of this issue another way. EPA, at this

stage of the litigation, does not seek to exercise regulatory |

jurisdiction over the Site. They are merely asserting their

rights as a creditor to a judgment previously entered in the

form of a Consent Decree. The immediate source of EPA’s

authority to obtain stipulated penalties in this case is the

judgment of this district court entered on January 26, 1999.

C. Other Issues ~

Defendants make several additional arguments in their

memorandum in support of the Rule 59(e) motion that require

a moment to address. First, they assert “[t]here exists a

genuine issue of fact as to whether [EPA] consented to delays

in the storm water-related tasks.” (Mem. at 9.) Assuming

arguendo, any factual dispute is not material to the matters

before the court. In the Consent Decree, the parties

specifically provided for the situations where EPA would

consent to extending deadlines and the method by which

Defendants could obtain consent from EPA.

b. If the required task has not been completed,

Defendants shall submit a written notice in

accordance with the requirements of Section VIII

(Force Majeure) below. Failure to submit such

37a

Appendix B

written notice shall constitute a waiver of

Defendants right to obtain an extension of time

under the provisions of Section VIII (Force

Majeure) below. Submission of any notice shall

not relieve Defendants of their obligation to

comply with any requirement of this Consent

Decree.

(Consent Decree at { 23.b. (emphasis added)) The governing

provision of the Force Majeure provides as follows:

24. If an event occurs which causes or may cause

Defendants to fail to comply fully and timely with

any requirement of this Consent Decree,

Defendants shall notify in writing EPA and the

Department of Justice, at the addresses stated in

Section X (Addresses for Submissions) below,

within fourteen days (14) of the date when

Defendants first learned of the violation, or within

fourteen days (14) of the date when Defendants

should have known of the event by the exercise

of due diligence. The notice shall describe in

detail....

(Id. at 4 24.)

25. If the parties to this Consent Decree agree that

the violation of a provision of this Consent Decree

has been or will be caused by circumstances

beyond the control of the Defendants . . . the time

for performance of such provision shall be

extended in writing by EPA....

38a

Appendix B

(Id. at 25.) Since Defendants have not produced evidence

tending to prove they obtained EPA’s consent in accordance

with the provisions of the Consent Decree, this theory of

Rule 59(e) relief fails. Cf United States v. A & A Farms,

No. 01-1380, slip op. at 8 (7th Cir. Jan. 18, 2002) (“This

provision, however, required A & A to notify the government

in writing of the alleged Force Majeure event in order to

excuse a deadline. Because A & A failed to do so, A&A

cannot now claim that compliance with the schedule was not

possible.” (citation omitted)).

Next, Defendants insist “[t]he court failed to consider

statutory criteria in calculating penalties.” (Mem. at 11.)

According to Defendants, imposition of stipulated penalties

pursuant to a consent decree requires the court to utilize

statutory damages criteria. This position has no support in

the law of this circuit. In fact, a panel of the Seventh Circuit

recently affirmed an approach to stipulated penalties similar

to the one undertaken in this case. The panel wrote:

[In] United States v. Krilich, 126 F.3d 1035

(7th Cir.1997), ... we upheld the imposition of

over $1 million in stipulated penalties. Krilich, a

property owner, entered into a consent decree to

settle the government’s Clean Water Act

claims. Krilich, 126 F.3d at 1036. In the decree,

Krilich promised to restore the subject wetlands

according to a schedule. Krilich missed the

scheduled deadlines and the government moved

to enforce the decree’s stipulated penalties

provision. /d. The district court granted the motion

and we affirmed. In so doing, we noted that Krilich

39a

Appendix B

had negotiated the decree, entered into it freely,

and never properly modified any of the deadlines.

Id. at 1037. Accordingly, Krilich was bound to

pay the stipulated penalties set forth in the consent

decree. We believe that the result in Krilich is

warranted in the instant case.

A&A Farms, at 7. Nothing in the text of A&A Farms (or, by

implication, Krilich) suggests the court must incorporate

statutory considerations into the calculation of stipulated

penalties, especially if the parties did not make the applicable

reference. Introducing factors not previously agreed upon by

the parties into the calculation of stipulated penalties would

render nugatory the “stipulated” part of the doctrine. Instead,

this court analyzed the stipulated penalties framework the

parties agreed upon in the Consent Decree, (See Consent

Decree at Ff 19-22.), and found it reasonable in light of the

CWA. Accord A&A Farms, at 5 (noting stipulated penalties

are enforceable as long as the provisions in the consent decree

establishing them are reasonable); South Suburban Hous. Ctr.

v. Berry, 186 F.3d 851, 856 (7th Cir. 1999). Then, the court

applied the penalty provisions in the Consent Decree to the

circumstances of this case. Since the text of the Consent

Decree does not signal this court to incorporate statutory

criteria into the penalty-imposing calculus, the court did not

do so.

40a

Appendix B

IV. CONCLUSION

For the foregoing reasons, the September 25, 2001 Order

in this action is hereby VACATED insofar as it concludes

wetland 6 is an “adjacent wetland” as that term is used in

CWA jurisprudence. Since this factual determination does

not impact the judgment embodied in the Consent Decree or

the September 25, 2001 judgment enforcing it, “Defendants’

Motion to Alter or Amend Judgment,” is hereby DENIED.

SO ORDERED.

s/ [illegible]

JUDGE, UNITED STATES

DISTRICT COURT

Enter: February 21st 2002

4la

APPENDIX C — ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE NORTHERN DISTRICT

OF INDIANA, HAMMOND DIVISION ENTERED

SEPTEMBER 25, 2001

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

HAMMOND DIVISION

No. 2:96 CV 540

UNITED STATES OF AMERICA

V.

RUETH DEVELOPMENT COMPANY, and

HAROLD G. RUETH

ORDER

The United States of America, acting on behalf of the

Environmental Protection Agency (“EPA”), movés to enforce

a consent decree between EPA and Rueth Development

Company and Harold G. Rueth (“Defendants”), entered with

this court on January 26, 1999 (“Consent Decree”).

Defendants have filed cross-motions for dispute resolution

and modification. Since the court feels the parties’ briefs are

adequate to address all the issues presented, a hearing is not

necessary and therefore Defendants’ “Request for Evidentiary

Hearing on Pending Motions” is DENIED. For the reasons

that follow, the court GRANTS the EPA’s motion to enforce

the Consent Decree and awards stipulated penalties in the

amount of $4,018,500 and ORDERS Defendants to complete

excavation as set forth in the Consent Decree within ninety

.

ook tetas

42a

Appendix C

(90) days of entry of this Order. The court also GRANTS

Defendants’ cross-motion for dispute resolution insofar as it

relates to wetland delineation and annual reporting and

DENIES Defendants’ motion to modify the Consent Decree.

Since the court has disposed of all issues without reference

to Exhibit A to Defendants’ Petition for Modification, EPA’s

“Motion to Strike” is DENIED AS MOOT.

BACKGROUND

On November 1, 1996, EPA filed a civil complaint

alleging that Defendants violated sections 301(a)' and 404?

of the Clean Water Act (“CWA”), by causing unlawful

dredging and filling at two parcels in the Castlewood

Development, located in southeastern Dyer, Indiana

(the “Site”). Prior to trial, Defendants and EPA agreed

to settle the case.’ In accordance with Section XII of the

1. “Except as in compliance with this section and sections 1312,

1316, 1317, 1328, 1342, and 1344 of this title, the discharge of any

pollutant by any person shall be unlawful.” 33 U.S.C. § 1311(a).

2. “The Secretary may issue permits ... for the discharge

of dredged or fill materials . . . at specific disposal sites.” 33 U.S.C.

§ 1344(a).

3. Defendants’ counsel signed the Decree on August 3, 1998.

The government had three signatories: David Ullrich, Acting EPA

Administrator for Region 5 (signed the Decree on September 10,

1998); Steven Herman, EPA Assistant Administrator for Enforcement

and Compliance Assurance (September 30, 1998); and Steven Rusak,

Department of Justice’s Environmental & Natural Resources Division

(October 21, 1998).

43a

Appendix C

Decree,‘ the Department of Justice solicited public comment

on the proposed Consent Decree. See Notice of Lodging of

Consent Decree Pursuant to the Clean Water Act, 63 Fed.

Reg. at 60,024 (Nov. 6, 1998). The United States received

no public comments.* The court subsequently entered the

Consent Decree on January 26, 1999. It required the

Defendants to (1) cease unlawful discharges;° (2) restore the

property’s wetlands in accordance with the “Castlewood

Development Wetland Restoration Plan” within the agreed-

to timeline;’ and (3) “pay a civil penalty of $23,500, payable

within thirty (30) days of the entry of this Consent Decree.””®

This court retained jurisdiction over the action to enforce,

modify, construe and resolve disputes arising out of the

Consent Decree.

4. Section XII of the Consent Decree provides:

34. Defendants consent to the entry of this Consent

Decree without further notice. The parties agree that after

the lodging of this Consent Decree, and prior to its entry,

the United states shall, pursuant to 28 C.F.R. § 50.7,

publish a public notice of this Consent Decree and

provide an opportunity for public comments. The United

States reserves the right to withhold or withdraw its

consent to entry of this Consent Decree based upon such

public comments.

5. The public comment period was thirty days from the date of

publication in the Federal Register. See id.

6. See Consent Decree, at J 15.

7. See id. at Ex.1 (Plan) & J 16 (Timeline).

8. Id. atG 17.

Pa emt MS Nie RS a ei Mi en rs ae PEt oA ll

Ait AR 7

44a

Appendix C

Now, EPA moves to enforce the Consent Decree. It seeks

an order requiring Defendants to complete excavation as

agreed in the Consent Decree, as well as stipulated penalties

and other appropriate relief. Defendants oppose the United

States’ motion and themselves move for dispute resolution

and modification under the Decree on various grounds.

JURISDICTION

Defendants urge modification of the Consent Decree

because “the U.S. EPA and/or U.S. Army Corps of Engineers

has lost jurisdiction of the property which is the subject of

the Consent Decree.” (Def. Pet. for Modification of Consent

Decree, at 2.) “{[MJodification of a consent decree may be

warranted when the . . . decisional law has changed to make

legal what the decree was designed to prevent.” Rujfo v.

Inmates of Suffolk County Jail, 502 U.S. 367, 388 (1992).

By way of “decisional law,” Defendants direct the court’s

attention to the Supreme Court’s decision in Solid Waste

Agency v. Army Corps of Engineers, 121 S.Ct. 675 (2001)

(“SWANCC’”). Since SWANCC has narrowed the Army Corps

of Engineers’ regulatory jurisdiction under the CWA, the

court first addresses this part of Defendants’ motion.

In SWANCC, the Army Corps of Engineers had

sought to regulate abandoned sand and gravel pits which had

evolved into a scattering of permanent and seasonal ponds.

See id. at 678. They based jurisdiction solely on the

existence of migratory bird species observed at the site (a.k.a.

The Migratory Bird Rule). See id. The Supreme Court held

this exercise of regulatory jurisdiction by virtue of the

45a

Appendix C

Migratory Bird Rule, “exceeds the authority granted to [the

Army Corps of Engineers] under § 404(a) of the CWA.”

Id. at 684.

In light of SWANCC, Defendants urge this court to rule

that the Army Corps of Engineers has no power to regulate

the Site. There are two fundamental factual differences

between Defendants’ Site and the real property at issue in

SWANCC. First, Defendants-Site is home to a natural wetland

which flows into connecting bodies of water. (See Consent

Decree, at Ex. 1.) In SWANCC, the bodies of water at issue

were isolated mining pits and ponds. In other words,

a molecule of water residing in one of these pits or ponds

could not mix with molecules from other bodies of water.

At Defendants’ Site, however, water molecules currently

present in the wetlands will inevitably flow towards and mix

with water from connecting bodies, including the Little

Calumet River. Secondly, the “Migratory Bird Rule” was the

sole basis of regulatory jurisdiction asserted by the Army

Corps of Engineers in SWANCC. With respect to Defendants’

Site, however, the government has never invoked the

Migratory Bird Rule. Instead, the government seeks to

regulate the Site on the theory that it is an “adjacent wetland.”

Under § 404(a) of the CWA, the Army Corps of

Engineers has the power to regulate wetlands adjacent to

navigable waterways. See United States v. Riverside Bayview

Homes, 106 S.Ct. 455 (1985). The holding in Riverside

Bayview Homes, as reaffirmed in SWANCC, turns on “the

significant nexus between the wetlands and ‘navigable

waters.’” SWANCC, 121 S.Ct. at 680. Since the Riverside

pe ee

46a

Appendix C

Bayview Homes standard remains applicable to wetlands, the

court considers whether the wetland on Defendants’ Site has

a “significant nexus” to a navigable waterway.

Defendants’ Site is a wetland which “has an affect on

flows to Dyer Ditch, and ultimately the Little Calumet River.”

(Consent Decree Ex. 1, at 15.) The Little Calumet River is

itself a navigable waterway.’ A drop of rainwater landing in

the Site is certain to intermingle with water from the Little

Calumet River. The relationship between the wetlands and

the navigable waterway is direct. The Site, therefore, has the

“significant nexus” to a navigable waterway necessary to

trigger Army Corps of Engineers’ regulatory jurisdiction

under CWA § 404(a).

THE CONSENT DECREE

A. Stipulated Penalties for Violations of the Consent Decree.

The United States seeks enforcement of Article VI of

the Consent Decree (“Stipulated Penalties”) for Defendants’

failure to (1) timely pay the $23,500 fine and (2) complete

the agreed upon tasks within the prescribed timeline.

Defendants argue Article VI of the Consent Decree is a

liquidated damages provision and an unenforceable penalty

because the amounts are unconscionable and bear no relation

9. “Navigable from the Indiana-Illinois State Line for 21.24 river

miles to Burns Waterway Harbor; and navigable for an additional

17.75 river miles to its junction (as Kemper Ditch) with Interstate

94. (The river is also navigable in Illinois.)” Natural Resources

Commission—Lake Michigan and Other Navigable Waters, at http:/

/www.state.in.us/ nrc/policy/III.html.

47a

Appendix C

to harm suffered.'® (See, e.g., Def. Mem. in Opp. to U.S.

Motion to Enforce Consent Decree, at 5, 10.)

“Although consent decrees have the force of a court

order, they are also a form of contract to be construed

according to basic principles of contract interpretation.”

Ahern v. Board of Educ., 133 F.3d 975, 981 (7th Cir. 1998).

“The source of the obligations in the decree is the parties’

will, not federal law.” Kasper v. Board of Election Comm'r.,

814 F.2d 332, 338 (7th Cir.1987). “[T]he intention of the

parties is the key to deciding whether a provision is to be

considered a penalty or liquidated damages.” United Order

of Am. Bricklayers and Stone Masons Union No. 21 v.

Thorleif, 519 F.2d 331, 332 (7 th Cir.1975). The parties titled

Article VI “Stipulated Penalties for Future Violations of

Consent Decree” (emphasis added) and use the phrase

“stipulated penalties” five times in the text of Article VI.

There is no evidence, in the text of the Consent Decree,

Defendants’ briefs or otherwise suggesting an intent to

liquidate damages. Therefore, the court finds the parties

10. An Agreement, made in advance of breach, fixing the

damages therefor, is not enforceable as a contract and does not affect

the damages recoverable for the breach, unless

(a) the amount «o fixed is a reasonable forecasi of just

compensation for the harm that is caused by the breach,

and

(b) the harm that is caused by the breach is one that is

incapable or very difficult of accurate estimation.

RESTATEMENT (SECOND) OF ConTRACTS § 339.

48a

Appendix C

intended Article VI of the Consent Decree to act as a

stipulated penalty and not liquidated damages.

The next question is whether the stipulated penalty

provision of Article VI is enforceable. In U.S. v. Krilich, 948

F.Supp. 719, 726 (N.D. Ill. 1996), aff’d., 209 F.3d 968

(7th Cir. 2000), cert. denied sub nom. Krilich v. U.S.,

531 U.S. 992 (2000), the court found “it would not be

unconscionable or otherwise inappropriate to have a

provision that imposes a penalty” in a consent decree to settle

CWA claims. The rationale for imposing the stipulated

penalties was that the parties “were reaching a compromise

regarding possible statutory penalties.” Jd. Under CWA, the

maximum statutory penalty is $ 25,000 per day for each

violation. See 33 U.S.C. § 1319(d). In light of this maximum

penalty, the court concluded it was not unconscionable to

enforce the stipulated penalty provision of $2,500 per day.

See id. at 726-27 (imposing stipulated penalties of

$1,307,500).

Prior to signing the Consent Decree, Defendants had two

options available. They could either litigate or settle. Had

they litigated, Defendants would have assumed the risk of

court-imposed civil penalties of up to $ 25,000 per day for

each violation of the CWA."' The amount of the penalties

11. In determining the amount of civil penalty the court shall

consider the seriousness of the violation or violations,

the economic benefit (if any) resulting from the violation,

any history of such violations, any good-faith efforts to

comply with the applicable requirements, the economic

impact of the penalty on the violator, and such other

matters as justice might require.

33 U.S.C. § 1319(d).

49a

Appendix C

would have been a function of factors not within Defendants’

direct control. Understandably, Defendants decided they did

not want to assume the risk of litigation. By settling,

Defendants traded the litigation risk for the certainty of

prescribed penalties and definite triggering events. As it

turned out, the Defendants and the government agreed upon

a schedule of stipulated penalties:

A. For day 1 up to and including $1,500.00 per day

day 30 of non-compliance

B. For day 31 up to and including $2,000.00 per day

day 60 of non-compliance

C. For day 61 and beyond of $2,500.00 per day

non-compliance

(Consent Decree, at § 19.) Defendants made a rational

decision about the risks associated with litigating the case.

Defendants arrived at this agreement through arms-length

negotiations and they were represented by competent counsel

throughout the process. Before entry of the Consent Decree,

the court found the terms to be reasonable and fair.

(See Consent Decree, at pg. 2.) In addition, the stipulated

amounts represent a small fraction of the maximum penalty

a court might impose under CWA. The court therefore finds

the stipulated penalty provision of the Consent Decree is

enforceable.

50a

Appendix C

(1) Payment of $23,500 penalty.

Defendants haa agreed to pay the $23,500 civil penalty

no later than thirty days after the court’s January 26, 1999

entry of the Consent Decree. On May 4, 1999, Defendants

remitted that amount to the government. (See Mem.

in Support of U.S. Motion to Enforce the Consent Decree,

at Ex. 4.) At no time prior to late payment of this penalty did

Defendants exercise their rights under the force majeure

provisions of the Consent Decree. See Consent Decree at

q 24 (“If an event occurs which causes or may cause

Defendants to fail to comply fully and timely with any

requirement of this Consent Decree, Defendants shall

notify in writing EPA and the Department of Justice.”). Since

Defendants remitted payment 67 days late, Defendants are

jointly and severally liable in the amount of $122,500.”

12. Calculated as follows: $45,000 for the first 30 days

(at $1,500 per day), plus $60,000 for the next thirty days (at $ 2,000

per day), plus $17,500 for the final seven days (at $ 2,500 per day).

Sla

Appendix C

(2) Completion of agreed upon tasks.

Defendants also agreed to complete the following tasks:

Task Deadline

a. Excavation December 31, 1998

b. Seal seven stormsewer inlets December 31, 1998

c. Raise one stormsewer inlet December 31, 1998

d. Replace stormwater pipe December 31, 1998

with solid pipe or encase in

impermeable material

je. Initial seeding and planting April 30, 1999

(Consent Decree, at § 16a.) The government asserts

Defendants have not adhered to the timeline and they move

to enforce the stipulated penalties.

Defendants argue, however, they should be liable for no

penalties whatsoever. In particular they claim, “[t]he delay

in completion of the excavation task until September 1999

was caused primarily by the fact that four of the deadlines in

the Decree had passed at the time the Decree was entered.”

(Def. Mem. in Opp. to the U.S. Motion to enforce the Consent

Decree, at 11.) Defendants had multiple opportunities to

remedy this. Defendants’ first chance was to bring its issue

with the deadlines to the court’s attention before the Consent

Decree was entered. Since they expressly assumed the risk

52a

Appendix C

of cumbersome governmental procedures,'? Defendants had

the burden of bringing this matter to the court’s attention.

Second, after the Consent Decree was entered, Defendants

had the right to notify the EPA and Department of Justice as

prescribed in the force majeure’* provision of the Consent

Decree. Defendants failed to invoke either of these readily-

available methods to communicate their need for additional

time.

In addition, the court is skeptical that the delay until

September 1999 was caused primarily by the government’s

slow response time. Counsel for Defendants signed the

agreement on August 3, 1998.'* Counsel is therefore

presumed to know that (1) the December 31, 1998 deadlines

were five months away and (2) the agreement was subject to

a public comment period of thirty days. This means that if

the government took only thirty days to finalize its approvals

and the court instantaneously entered the settlement,

Defendants would have had four months from the date of

13. “Defendants consent to the entry of this Consent Decree

without further notice.” (Consent Decree, at] 34.)

14. 25. If the parties to this Consent Decree agree

that the violation of a provision of this Consent

Decree has been or will be caused by

circumstances beyond the control of the

Defendants . . . the time for performance of such

provision shall be extended in writing by EPA for

a period equal to the actual delay resulting from

such circumstances.

15. See supra note 3.

53a

Appendix C

entry until the December 31, 1998 deadline. Had Defendants

completed excavation within four months of entry of the

Consent Decree, the court could perhaps appreciate

Defendants’ position that the government’s response time was

a factor in the excavation delay. Yet, it tock eight months

from the date of entry for Defendants to substantially perform

their excavation duty under the Consent Decree. Defendants

present no reason why the court should let Defendants off

the hook for stipulated penalties.

Nevertheless, Defendants’ point is well taken; EPA must

bear some of the burden associated with their unwieldy

procedures. On the day the Consent Decree was entered,

January 26, 1999, the deadline had already expired for the

first four tasks. Under the technical terms of the Consent

Decree, stipulated penalties had begun to accrue on December

31, 1998. Clearly, for the court to impose penalties for the

period of time before the Consent Decree was entered would

be inequitable. The court, therefore, in the exercise of

discretion, extends a four month “credit” to Defendants, by

calculating stipulated penalties from the date four months

(120 days) after January 26, 1999.

a. Excavation.

Defendants agreed to complete excavation no later than

December 31, 1998. They began excavation during the

week of September 20, 1999. (See Mem. in Support of

U.S. Motion to Enforce the Consent Decree, at Ex. 9 & 10.)

On October 1, 1999, the excavation work was complete.

The government notes that only 95% of the work was

completed by that time. For that reason, the government also

seeks penalties beyond October 1, 1999.

54a

Appendix C

Defendants’ completion of 95% of excavation work

brought them into substantial compliance with the Consent

Decree. The ‘ourt believes it would be inequitable to

bring the fuli ...ith of the penalty provision to bear on

Defendants for the period of time after which they were in

substantial compliance. The court, therefore, in the exercise

of discretion, will only consider the imposition of penalties

up to October 1, 1999.

After applying the four month credit, Defendants were

127 days late in completing the excavation work as agreed

in the Gonsent Decree. Therefore, the court finds the

Defendants jointly and severally liable for $ 272,500"° in

stipulated penalties for the untimely completion of the

excavation.

b. Seal seven stormsewer inlets; c. Raise stormsewer iniet;

d. Replace stormwater pipe with solid pipe or encase in

impermeable material.

Defendants agreed to seal seven stormsewer inlets, raise

a stormsewer inlet and replace a stormwater pipe or encase

it with impermeable material, no later than December 31,

1998. Defendants did not complete these tasks until October

1, 2000, 613 days after the Consent Decree was entered.

Defendants seek to avoid stipulated penalties for the untimely

completion. They assert “the completion of these tasks was

delayed by circumstances involving changed facts, and

concerns by the Town of Dyer.” (Def. Mem. in Opp. to the

16. Calculated as follows: $ 45,000 for the first 30 days

(at $1,500 per day), plus $ 60,000 for the next 30 days (at $ 2,000

per day), plus $ 167,500 for the final 67 days (at $ 2,500 per day).

55a

Appendix C

U.S. Motion to enforce the Consent Decree, at 12.) The force

majeure to which the parties agreed was designed to address

precisely this situation. See supra note 14. Defendants proper

remedy for the delays was to assert their rights under the

force majeure, not to seek modification of the decree after

the fact.!’

After applying the four month (120 day) credit,

Defendants are liable for 493 days of penalties. The court

finds Defendants jointly and severally liable in the amount

of $1,187,500'* for each of the three - :timely tasks for a

total stipulated penalty of $3,562,500.

e. Initial seeding & planting.

Defendants also agreed to complete initial seeding and

planting no later than April 30, 1999. Defendants admit

the seeding and planting was finalized on October 5, 1999.

(See Mem. in Support of U.S. Motion to Enforce the Consent

Decree, at Ex. 17.) This constitutes a delay of 158 days.

The government also seeks stipulated penalties for

Defendants’ failure to make timely notification of the seeding

and planting. The general purpose of the Consent Decree was

to clean up the Site and return it to environmental compliance.

17. In addition, if the court absolves Defendant from the

stipulated penalties on the grounds Defendants suggest, the court

would be reading the force majeure out of the Consent Decree.

18. Calculated as follows: $45,000 for the first 30 days

(at $1,500 per day), plus $60,000 for the next 30 days (at $2,000

per day), plus $1,082,500 for the final 433 days (at $2,500 per day).

56a

Appendix C

The parties agreed to accomplish this through the completion

of certain tasks. Defendants have complied with the specific

substantive task of seeding and planting but failed to strictly

adhere to the notification requirements. Notification

requirements serve important objectives and compliance with

them is required. Yet, the court will not exercise its equitable

powers in favor of imposing additional penalties for merely

failing to notify where the substantive portion of the task

has been completed. Therefore, the court finds Defendants

jointly and severally liable in the amount of $61,000."

B. Defendants’ Motion for Dispute Resolution.

Next, the court considers Defendants’ Petition for dispute

resolution. Defendants seek dispute resolution with respect

to the portion of the Consent Decree requiring them to

“{cjonduct wetland boundary delineation of areas required

to be restored under this consent decree” no later than June

1999. (Consent Decree, at J 16.) Defendants propose a

revised deadline for wetland delineation of September 30,

2000. (See Def. Pet. for Dispute Resolution under Consent

Decree, at ¥ 25.) In the interest of producing an accurate

boundary delineation, the court adopts Defendants’ proposal

for the revised deadline of September 30, 2000. Defendants

remain obliged to secure all notifications, approvals and

consents as prescribed in the Consent Decree.

Defendants also seek dispute resolution with respect to

the portion of the Consent Decree requiring them to “[s]ubmit

19. Calculated as follows: $45,000 for the first 30 days

(at $1,500 per day), plus $16,000 for the next 8 days (at $2,000

per day).

57a

Appendix C

annual monitoring report[s]” for the five year period ending

September 2002. (Consent Decree, at § 16.) Defendants

propose that they produce six annual reports, from September

2000 through September 2005, inclusive. (See Def. Pet. for

Dispute Resolution under Consent Decree, at J 25.) Since

an important objective of the Consent Decree is to ensure

prospective environmental health of the Site, the court grants

Defendants’ petition for dispute resolution with regard to the

annual monitoring reports.

As for the other issues raised in defendants’ Petition for

Dispute Resolution, the court has previously addressed them

in the discussion of stipulated penalties.

C. Completion of Excavation.

The government also seeks excavation of the remaining

5% of the Site. This is described as a “115 foot by 40 foot

area within the wetland restoration area.” (Mem. in Support

of U.S. Motion to Enforce Consent Decree, at Ex. 2, § 24.)

According to EPA officer Gregory T. Carlson, Defendants

had not excavated this area as of September 25, 2000. (/d.)

Defendants claim they have completed all excavation and

there is no duty under the Consent Decree to perform further

excavation. They assert the EPA’s conclusions about the duty

to excavate the 115' x 40' area “were based upon erroneous

interpretations of data and of the Restoration Plan.”

(Def. Mem. in Opp. to the U.S. Motion to Enforce the

Consent Decree, 11.)

The affidavit of Defendants’ environmental consultant,

Eric Ellington, (“Ellington Affidavit”) however, suggests the

58a

Appendix C

need for additional excavation. In particular, paragraphs 16

and 17 of the Ellington Affidavit refer to requests for “95%

completion inspection” and paragraph 20 notes Mr. Carlson

of EPA’s review and approval of the “95% earthwork

completion.” This is a clear acknowledgment by Defendants’

consultant that Defendants needed to excavate another 5%.

Defendants are hereby ordered to do so no later than ninety

(90) days from the filing of this Order. If Defendants have

already excavated the remaining 5%, they merely need to

satisfy the notification and approval requirements of the

Consent Decree. If the Defendants have a bona fide dispute

over “interpretations of data and of the Restoration Plan,”

the court refers Defendants to the Dispute Resolution

provisions” of the Consent Decree.

For the foregoing reasons, IT IS THEREFORE

ORDERED THAT Defendants are jointly and severally

liable for $4,018,500 of stipulated penalties for violations

of the Consent Decree.

IT IS FURTHER ORDERED THAT Defendants

complete excavation as required in the Consent Decree no

later than ninety (90) days from the date of the issuance of

this Order.

THE COURT FINDS THAT Defendants substantially

complied with their boundary delineation duty by September

30, 2000, GRANTS dispute resolution in favor of Defendants

by declining to assess stipulated penalties for completion of

the aforementioned delineation and ORDERS Defendants

20. See Consent Decree, at IX.

59a

Appendix C

to comply with all notification and consent requirements

relating thereto, as set forth in the Consent Decree.

IT IS FURTHER ORDERED THAT Defendants

submit annual monitoring reports in accordance with the

specifications set forth in the Consent Decree, from

September 2000 through September 2005, inclusive.

IT IS FURTHER ORDERED THAT Defendants’

“Request for Evidentiary Hearing on Pending Motions”

is DENIED.

IT IS FURTHER ORDERED THAT Defendants’

“Petition for Modification of Consent Decree” is DENIED.

IT IS FURTHER ORDERED THAT the “United

States’ Motion to Strike” is DENIED AS MOOT.

THE CLERK IS DIRECTED TO ENTER

JUDGMENT in favor of the United States of America,

against Rueth Development Company and Harold G. Rueth,

jointly and severally, in the amount of $4,018,500,

for stipulated penalties for violations of the consent

decree between these three parties entered by this court on

January 26, 1999.

SO ORDERED.

s/ Moody

JUDGE, UNITED STATES DISTRICT JUDGE

Enter: September 25, 2001

60a

APPENDIX D — CONSENT DECREE OF THE UNITED

STATES DISTRICT COURT FOR THE NORTHERN

DISTRICT OF INDIANA

DATED AND FILED JANUARY 26, 1999

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF INDIANA

Civil Action No. 2:96CV-540-JM

UNITED STATES OF AMERICA,

Plaintiff,

v.

RUETH DEVELOPMENT COMPANY,

and HAROLD G. RUETH,

Defendants.

CONSENT DECREE

WHEREAS, the United States of America, on behalf of

the United States Environmental Protection Agency (“EPA”),

filed a complaint herein on November 1, 1996, (“Complaint”)

alleging that defendants Rueth Development Company and

Harold G. Rueth (collectively the “Defendants”) have

violated the Clean Water Act (“CWA”), 33 U.S.C. §§ 1311

and 1344; and

WHEREAS, the violations alleged involved unlawful

dredging and filling of federally regulated wetlands on certain

property located in southeastern Dyer, Indiana, referred to

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Appendix D

in the Complaint as Castlewood Unit No. 3A and Castlewood

Unit No. 3B (the “Site”), described in local land records as

the South Half of Section 18, Township 35 North, Range 9

West of the Second Principal Meridian; and

WHEREAS, the Defendants are alleged to have owned

or controlled the Site, to have carried out the unlawful

dredging and filling at the Site, or to have controlled and

directed the unlawful dredging and filling at the Site; and

WHEREAS, the Defendants deny unlawfully dredging

and filling federally regulated wetlands at the Site or

otherwise violating sections 301(a) and 404 of the CWA,

33 U.S.C. § 1311(a) and 1344, at the Site; and

WHEREAS, the parties to this Consent Decree wish to

settle and compromise this case; and

WHEREAS, the parties to this Consent Decree agree that

settlement of this case is in the public interest and that entry

of this Consent Decree without further pretrial proceedings

or a trial of any issue of fact or law in this case is the most

appropriate means of resolving this matter; and

WHEREAS, the Court finds that this Consent Decree is

a reasonable and fair settlement of this action and that it

adequately protects the public interest in accordance with

the CWA;

NOW, THEREFORE, before the taking of any testimony

and without trial or adjudication of any issue of fact or law,

and upon consent of the parties by their attorneys and

authorized officials,

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Appendix D

IT IS HEREBY AGREED, ORDERED, ADJUDGED

AND DECREED as follows:

DEFINITIONS

A. “Castlewood Development Wetland Restoration

Plan” means the specifications and criteria for wetland

restoration and mitigation embodied in the following five

documents, all of which are attached hereto as Exhibit 1 and

incorporated herein by reference: (1) “Wetland Restoration

Castlewood Development, Dyer, Indiana - Unit 3B,”

(2) “Wetland Restoration - Demolition, Castlewood

Development, Dyer, Indiana - Unit 3B,” (3) “Wetland

Restoration - Grading/Re-vegetation, Castlewood

Development, Dyer, Indiana - Unit 3B,” (4) “Wetland

Restoration - Details, Castlewood Development, Dyer,

Indiana - Unit 3B,” and (5) “Wetland Restoration -

Specifications, Castlewood Development, Dyer, Indiana -

Unit 3B.” In case of ambiguity or conflict between the

Castlewood Development Wetland Restoration Plan and this

Consent Decree, the provisions of this Consent Decree shall

control.

B. “Vegetative Performance Standards” mean the

following: (1) by the end of the second full growing season,

75% vegetative coverage in each plant community zone;

(2) by the 5th anniversary of the planting/seeding date, 80%

coverage in each plant community zone; (3) no greater than

20% of species coverage within any plant community zone

may be non-native species; and (4) each plant community

zone is dominated by facultative plus (“FAC+’’), facultative

wetland (“FACW”), or obligate (“OBL”) plant species in

63a

Appendix D

accordance with the National List of Plant Species That Occur

in Wetlands: North Central (Region 3).

C. “Non-native species” mean those species identified

as such in the Fourth Edition of Plants o/ the Chicago Region,

by Floyd Swink and Gerould Wilhelm, me Academy of

Sciences Press, 1994.

D. “Dominance” means more than 500 of the dominant

plant species (as measured by percent area coverage) from

all strata are Obligate (OBL), Facultative Wet (FACW) or

Facultative (FAC) (excluding Facultative Minus (FAC-)) on

the National List of Plant Species That Occur in Wetlands:

North Central (Region 3).

I. JURISDICTION AND VENUE

1. This Court has jurisdiction over the subject matter of

this action and jurisdiction over the parties pursuant to

28 U.S.C. §§ 1331, 1345 and 1355, and CWA section 309(b),

— 33: U.S.C. § 1319(b).

2. The Complaint states a claim upon which relief

can be granted pursuant to CWA sections 301, 309 and 404,

33 U.S.C. §§ 1311, 1319, and 1344. -

3. Venue is proper in this District pursuant to 28 U.S.C.

§ 1391(b), and CWA section 309(b), 33 U.S.C. § 1319(b).

64a

Appendix D

I]. APPLICABILITY

4. The provisions of this Consent Decree shall apply to

and be binding upon the parties to this action, their officers,

directors, servants, employees, successors or assigns and any

person, firm, association or corporation who is, or will be,

acting in concert or participation with the Defendants,

whether or not such person has notice of this Consent Decree.

Each of the Defendants shall provide a true copy of this

Consent Decree, including all exhibits thereto, to any

successor to his or her interest, and shall simultaneously

notify the EPA and the United States Department of Justice,

at the addresses specified in Section X (Addresses for

Submissions), below, that such copy to any successor in

interest has been given. In any action to enforce this Consent

Decree, none of the Defendants shall raise as a defense the

failure of any agents, employees, successors or assigns, or

of any person, firm or corporation to take any actions

necessary to comply with the provisions hereof.

5. This Consent Decree shall constitute a complete and

final settlement of all civil claims against the Defendants in

connection with Defendants’ alleged violations of the CWA

as set forth in the Complaint; and pertaining to civil penalties

for Defendants’ alleged CWA violations as set forth in the

Complaint. The United States, however, does not waive its

rights concerning criminal violations pursuant to section

309(c) of the CWA, 33 U.S.C. § 1319(c), or violations

concerning imminent and substantial endangerment pursuant

to section 504 of the CWA, 33 U.S.C. § 1364.

65a

Appendix D

6. The transfer of ownership or other interest by any of

the Defendants in the Site shall not alter or relieve the

Defendants of their obligation to comply with all the terms

of this Consent Decree. Should any of the Defendants make

a transfer of ownership or any interest in the Site prior to the

termination of the terms of this Consent Decree, Defendants

shall notify EPA of such transfer and shall reserve such rights

as are necessary to compiy successfully with the terms of

this Consent Decree.

7. By entering this Consent Decree, Defendants do not

admit that they have committed the violations of the CWA

as set forth in the Complaint.

8. Except as provided in Paragraph 41 of this Consent

Decree, this Consent Decree shall not constitute and shall

not be interpreted to be a permit to discharge pollutants

pursuant to CWA sections 402 or 404, 33 U.S.C. §§ 1342 or

1344. The United States does not, by its consent to the entry

of this Consent Decree, warrant or aver in any manner that

Defendants’ compliance with this Consent Decree will result

in compliance with section 301 of the CWA. Notwithstanding

EPA’s review and approval of any plans, Defendants shall

remain responsible for compliance with the terms of this

Consent Decree and the CWA.

9. This Consent Decree in no way affects or relieves

the Defendants of their obligations to comply with any

federal, state, or local law, regulation, or permit.

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Appendix D

10. This Consent Decree is not a settlement of, and in

no way affects the United States’ mghts to seek penalties,

injunctive relief, or remedial actions with respect to any

violation by the Defendants of federal, state or local

laws, regulations, or permit conditions not alleged in the

Complaint.

11. This Consent Decree in no way affects the rights of

the United States as against any person not a party hereto.

Ill. PARTIES

12. The Plaintiff is the United States of America.

The United States Department of Justice is authorized to

bring this suit pursuant to 28 U.S.C. §§ 516 and 519, and

CWA section 506, 33 U.S.C. § 1366.

13. Rueth Development Company is an Indiana limited

partnership, with a business address of 1006 165th Street,

Hammond, Indiana.

14. Harold G. Rueth is and was at the time of the

violations alleged in this Complaint, a general partner in

Rueth Development Company.

. IV. INJUNCTIVE RELIEF

NOW, THEREFORE, with the consent of the parties, it

is hereby ORDERED:

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Appendix D

CESSATION OF UNAUTHORIZED DISCHARGES

15. Defendants are permanently enjoined from taking

any actions, or causing others to take any actions, at the Site

which result in the discharge of dredged or fill material into

waters of the United States, as defined by the CWA and

regulations promulgated thereunder, except as in compliance

with an individual permit issued pursuant to CWA section

404(a), 33 U.S.C. § 1344(a), with any applicable general

permit issued by the United States Ar:ny Corps of Engineers,

or as may be necessary to effect remediation pursuant to

Paragraph 16 of this Consent Decree.

RESTORATION

16. Defendants shall conduct and complete the

“Castlewood Development Wetland Restoration Plan” which

is attached to this Consent Decree as Exhibit 1. The parties

acknowledge and agree that the objective of the “Castlewood

Development Wetland Restoration Plan” is to replace the lost

functions and values of the filied wetlands described in the

Complaint by creating and restoring freshwater wetlands in

the Restoration Area. To satisfy the obligation of this

Paragraph 16, Defendants are ordered to do the following:

a. The Defendants shall conduct any and all Wetland

Restoration at Castlewood Estates in accordance with the

following schedule:

DEADLINE

December 31, 1998

December 31, 1998

December 31, 1998

=P Pe PP

68a

Appendix D

TASK

Complete excavation of soils to the

wetland subgrade according to the

Limits of Work in the “Castlewood

Development Wetland Restoration

Plan,” attached hereto as Exhibit 1.

Cement in or seal the grated stormsewer

inlets with water tight solid covers at

the following locations:

1. northeast corner of Lot #25;

back end of Lot #29;

back end of Lot #30;

back end of Lot #31;

southwest corner of Lot #26;

northwest corner of Lot #26; and

northern curb/gutter of Canterbury

Court (just south of the southwest

corner of Lot #26).

Raise the stormsewer inlet at the

northeast corner of Lot #32 to a mean

sea elevation of 643.4 feet. The

elevation must be verified by a

certified professional land surveyor.

69a

Appendix D

December 31, 1998 A portion of the stormwater pipe

April 30, 1999

June 1999

behind Lots #28 - #32 will be

excavated or televised and, if found to

be constructed of perforated pipe, will

either be removed and replaced with

solid pipe or encased in impermeable

material. Defendants shall notify EPA

no less than one week prior to

commencing this procedure.

Complete initial seeding and planting

according to the seeding mixes

provided for in the “Castlewood

Development Wetland Restoration

Plan,” attached hereto as Exhibit 1.

Conduct wetland boundary delineation

of areas required to be restored under

this consent decree through ay)plication

of EPA’s approved delineation manual.

This delineation report shall be

included in the August - September

1999 annual monitoring report.

b. The Defendants shall submit monitoring reports

pursuant to the following schedule:

August - September 1999

Submit annual monitoring report

within 2 weeks of the field monitoring

day or the next business day.

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Appendix D

August - September 2000

Submit annual Monitoring report

within 2 weeks of the field monitoring

day or the next business day.

August - September 2001

Submit annual monitoring report

within 2 weeks of the field monitoring

day or the next business day.

August - September 2002

Submit annual monitoring report

within 2 weeks of the field monitoring

day or the next business day.

August - September 2003

Submit annual monitoring report

within 2 weeks of the field monitoring

day or the next business day.

Defendants’ monitoring reports shall describe and quantify:

(1) maintenance of erosion control measures; (2) site inundation

and soil saturation; (3) local precipitation records for the five

month period preceding the annual monitoring event and daily

records for the thirty (30) day period preceding the annual

monitoring event; and (4) attainment of vegetative performance

standards. Monitoring work shall be conducted in August of

each monitoring year during 1999 - 2003.

7la

Appendix D

c. The “Castlewood Development Wetland Restoration

Plan” shall be an enforceable obligation of this Consent

Decree.

d. Defendants shall provide notices and plans if

necessary under paragraph g to EPA’s project manager, as

identified in Section X (Addresses for Submissions) of this

Decree, and an opportunity for inspection by EPA upon the

completion of the following milestone events:

(i) Within thirty (30) days after the removal of

dredged and fill material, excavation, final grading, and the

raising or sealing of stormsewer inlets, but before seeding

and planting has begun (in this notice Defendants shall

provide EPA’s project manager with spot elevations of grades,

including the height of the stormwater inlet at the northeast

corner of lot 32 in addition to the other information

Defendants are required to provide under the provisions of

this Consent Decree);

(ii) Within, two weeks after the completion of

seeding and planting required by the “Castlewood

Development Wetland Restoration Plan;” and

(iii) Within 30 days prior to the 1999-2003 August

field monitoring dates noted in “Castlewood Development

Wetland Restoration Plan” referred to in Paragraph 16b.

The notices shall include: a description of the actions

taken to implement the “Castlewood Development Wetland

Restoration Plan” since the previous notice or approval of

the “Castlewood Development Wetland Restoration Plan;”

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Appendix D

information regarding problems or unresoived delays

encountered or anticipated that may affect the schedule for

implementation; efforts made to mitigate any actual or

anticipated delays; and all other information required by

Section VII (Notices) of this Consent Decree.

e. Following EPA’s receipt of a notice of completion

of a milestone event as required in Paragraph 16(d), EPA

shall have thirty (30) days to conduct an inspection.

Defendants agree that they will not continue with any

subsequent steps required by the “Castlewood Development

_Wetland Restoration Plan” until EPA has performed its

inspection and has approved the work; provided, however,

that if EPA has not conducted an inspection within thirty

(30) days of its receipt of the notice, then Defendants may

proceed to the next step of the “Castlewood Development

Wetland Restoration Plan.” :

f. Following EPA’s inspection after the completion

of seeding and planting, if EPA agrees that the task has been

completed as approved, EPA will issue a Certification of

Completion. Following Certification, Defendants shall

perform all operation and maintenance activities required

under the “Castlewood Development Wetland Restoration

Plan” as approved. If EPA disagrees that the task has been

completed as approved, EPA will issue a letter specifying in

detail all deficiencies.

g. Should any of the wetlands restored, created or

enhanced pursuant to Paragraph 16 of this Consent Decree

fail to achieve the performance standards specified in the

“Castlewood Development Wetland Restoration Plan” by the

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Appendix D

date of the fifth anniversary of planting, Defendants and the

United States shall meet to develop the subsequent steps

necessary to achieve the objectives of the “Castlewoc d

Development Wetland Restoration Plan” and a schedule

for completing the subsequent steps (“Subsequent Steps”).

If Defendants and the United States are able to establish

mutually agreeable Subsequent Steps, then within ninety (90)

days of such notice from EPA, Defendants shall incorporate

the Subsequent Steps into an amended “Castlewood

Development Wetland Restoration Plan.” Defendants shall

implement the amended “Castlewood Development Wetland

Restoration Plan,” as approved by EPA, in accordance with

the schedule in that amended “Castlewood Development

Wetland Restoration Plan,” and the amended plan shall

be an enforceable obligation of this Consent Decree.

If Defendants and the United States are unable to establish

mutually agreeable Subsequent Steps within the time frame

set forth above, then either party may petition the Court for

resolution in accordance with the dispute resolution provision

in Section IX (Dispute Resolution) of this Consent Decree.

h. If the Defendants do not complete the

“Castlewood Development Wetland Restoration Plan”

required under this Paragraph 16 and the requirements of

Paragraph 16(a) and 16(b) above, they will be subject to

stipulated penalties as provided in Section VI (Stipulated

Penalties) of this Consent Decree.

i. The Defendants shall be responsible for making

timely applications for and obtaining all necessary permits

from all governmental bodies for the mitigation, restoration

and enhancement work required by the “Castlewood

Development Wetland Restoration Plan.”

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Appendix D

V. CIVIL PENALTIES

17. The Defendants shall pay a civil penalty of $23,500,

payable within thirty (30) days of the entry of this Consent

Decree. Payment shall be made in accordance with the

provisions of Paragraph 20 below, and mailed to the

Department of Justice, at the address set forth in Section X

(Addresses for Submissions) below. Civil Penalties shall be

paid in addition to any payments which may be required under

Section VI (Stipulated Penalties) below.

18. In the event that payment of the civil penalty

assessed in this Consent Decree is not made, this Consent

Decree shall be considered an enforceable judgment for

purposes of post-judgment collection, in accordance with

Fed. R. Civ. P. 69, and other applicable federal statutory

authority.

VI. STIPULATED PENALTIES FOR FUTURE

VIOLATIONS OF CONSENT DECREE

19. Unless excused by the provisions of Section VIII

(Force Majeure) below, Defendants shall incur the following

stipulated penalties for failure to comply with any milestone

set forth in the “Castlewood Development Wetland

Restoration Plan,” attached hereto as Exhibit 1, and any

milestone set forth in Paragraph 16 and Paragraph 17 of this

Consent Decree, or any other requirement of this Consent

Decree to which the United States reserves its rights under

the CWA. The stipulated penalties shall be paid within five

days of the day of non-compliance.

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Appendix D

A. For day | up to and including $1500.00 per day

day 30 of non-compliance

B. For day 31 up to and including $2000.00 per day

day 60 of non-compliance

Cc. For day 61 and beyond of

non-compliance $2500.00 per day

20. The civil penalty provided for in Section V (Civil

Penalties) above, and any stipulated penalties incurred under

this Consent Decree shall be paid by certified or cashier’s

check, payable to the “Treasurer of the United States of

America,” and delivered to the United States Department of

Justice at the address specified in Section X (Addresses for

Submissions) below. Upon making such payment, Defendants

shall simultaneously send EPA, at the address specified in

Section X (Addresses for Submissions) below, a copy of the

check and the letter transmitting it.

21. In the event that Defendants fail to make timely

payment of any of the monies due pursuant to this Consent

Decree, interest will be charged *n accordance with the rate

established by the Secretary of the Treasury pursuant to

31 U.S.C. § 3717, from the time payment is due until the

time it is made.

22. Nothing in this Consent Decree shall be construed

to limit any other remedies available to the United States for

violations of this Consent Decree, such as the institution of

contempt proceedings, or any provisions of law, including

CWA section 504, 33 U.S.C. § 1364. The stipulated penalties

76a

Appendix D

set forth in Paragraph 19 above shall not limit the United

States’ right to apply to the Court for the maximum civil

penalties allowed by the CWA per day of violation of the

CWA. Any disputes about the Defendants’ liabinty for

stipulated penalties that cannot be resolved by the parties

hereto shall be resolved by motion to this Court, in

accordance with the Dispute Resolution provisions of Section

IX (Dispute Resolution) below.

Vil. NOTICES

23. All notices required to be filed pursuant to

the “Castlewood Development Wetland Restoration Plan,”

attached hereto as Exhibit 1, and as required under Paragraph

16 of this Consent Decree shall be provided to EPA and the

United States Department of Justice at the addresses specified

in Section X (Addresses for Submissions) of this Consent

Decree, and shall state whether or not all of that work required

by that particular milestone has been completed.

a. If the required task has been completed, the notice

shall specify the date on which it was completed, attach any

photographs, videotapes, or other appropriate evidence of

- such completion and include a certification by the Defendants

that such completion has been achieved. Such certifications

shall be made in the following form:

I/we certify that the information contained

in and/or accompanying this (submission)

(document) is true, accurate and complete.

As to (the) (those) portion(s) of this

(submission) (document) for which I/we

77a

Appendix D

cannot personally verify (its) (their) truth and

accuracy, I/we certify, as the company

official(s) having supervisory responsibility

for person(s) who, acting under my/our direct

instructions; made the verification, that this

information is true, accurate and complete.

If the notice is prepared by a contractor or consultant retained

by one or more of the Defendants, the certification shall

consist of two parts: first, a statement in the above form

signed by an officer of the contractor or consultant; and

second, a statement signed by one of the Defendants, which

shall state as follows:

As the (individual) (company official) having

responsibility for the oversight of the

(contractor) (consultant) who prepared this

document, I certify that I have made a

reasonably diligent effort to verify the truth

and accuracy of the document and that it is,

to the best of my knowledge, true, accurate, :

and complete.

b. If the required task has not been completed,

Defendants shall submit a written notice in accordance with

the requirements of Section VIII (Force Majeure) below.

Failure to submit such written notice shall constitute a waiver

of Defendants’ right to obtain an extension of time under the

provisions of Section VIII (Force Majeure) below.

Submission of any notice shall not relieve Defendants of their

obligation to comply with any requirement of this Consent

Decree.

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Appendix D

Vill. FORCE MAJEURE

24. If an event occurs which causes or may cause

Defendants to fail to comply fully and timely with any

requirement of this Consent Decree, Defendants shall notify

in writing EPA and the Department of Justice, at the addresses

stated in Section X (Addresses for Submissions) below,

within fourteen days (14) of the date when Defendants first

jearned of the violation, or within fourteen days (14) of the

date when Defendants should have known of the event by

the exercise of due diligence. The notice shall describe in

detail: the event or events which have caused the violation,

the anticipated length of time the violation may persist, the

measures taken or intended to le taken by Defendants to

prevent or minimize the violation, and the timetable by which

those measures will be implemented. Failure to comply with

the notice requirements of this section shall constitute a

waiver of Defendants’ right to obtain an extension of time

under Paragraph 25 below as to the particular violation

involved. Defendants shall also give written notice within

fourteen (14) days of the occurrence of any event which gives

Defendants reason to believe that such event will cause a

violation of any provision of this Consent Decree.

25. If the parties to this Consent Decree agree that the

violation of a provision of this Consent Decree has been or

will be caused by circumstances beyond the control of the

Defendants or of any entity controlled by Defendants,

including consultants and contractors, and that Defendants

and such entities could not have reasonably foreseen and

prevented such violation, the time for performance of such

provision shall be extended in writing by EPA for a period

79a

Appendix D

equal to the actual delay resulting from such circumstances,

and stipulated penalties shall not be due for the delay.

26. If the parties to this Consent Decree are unable to

agree whether the violation was caused by circumstances

beyond the control of Defendants or any entity controlled by

Defendants, or whether the length of time for fulfilling the

provision should be extended, the matter may be submitted

by any party to the Court for resolution, in accordance with

the requirements of Section IX (Dispute Resolution) below.

The Defendants shall bear the burden to prove that any delay

was caused by unforeseen circumstances beyond the

Defendants’ control. If the violation is then determined to

have been caused by circumstances beyond the control of

Defendants and of any entity controlled by Defendants,

including consultants or contractors, and that Defendants

could not have reasonably foreseen and prevented such

violation, Defendants shall be excused as to that violation

for the period of time the violation continues due to such

circumstances.

27. Neither reasonably foreseeable technical problems,

changes in Defendants’ financial circumstances, nor

unanticipated or increased costs or expenses associated with

the implementation of actions required by this Consent

Decree shall serve as the basis for changes in this Consent

Decree or extensions of time for the performance of its

requirements.

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Appendix D

IX. DISPUTE RESOLUTION

28. Any dispute arising under or with respect to this

Consent Decree shall in the first instance be the subject of

informal negotiations among the parties to this Consent

Decree for a period of fifteen (15) working days from the

time notice of the existence of the dispute is given. The period

for negotiations may be extended by written agreement of

the parties to this Consent Decree.

29. If a dispute cannot be resolved by informal

negotiation under Paragraph 28 above, then the position

advanced by the United States shall be considered binding

unless, within fifteen (15) days after the end of the informal

negotiations period, Defendants file a petition with this Court

setting forth the matter in dispute, the efforts made by the

parties to resolve it, and Defendants’ proposed resolution.

The United States shall have twenty (20) days to file a

response to Defendants’ petition with an alternative proposal

for resolution of the dispute. In proceedings on any dispute

under this Paragraph, Defendants shall have the burden of

showing that their proposal meets the requirements of this

Consent Decree and the CWA.

30. The filing of a petition asking the Court to resolve a

dispute shall not of itself extend or postpone any obligation

of Defendants under this Consent Decree, but the payment

of stipulated penalties with respect to the disputed matter

shall be stayed pending resolution of the dispute. To the extent

Defendants show that a delay or other noncompliance was

due to a force majeure event or otherwise prevails on the

disputed issue, stipulated penalties shall be excused.

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Appendix D

X. ADDRESSES FOR SUBMISSIONS

31. Any payment of monies due under the terms of this

Consent Decree, notices, or other submissions required to

be submitted to EPA or the United States Department of

Justice shall be delivered to the following addresses:

A. To The United States Department of Justice:

Steven E. Rusak, Trial Attorney

U.S. Department of Justice

Environment and Natural Resources Division

10th & Constitution Avenue, N.W.

Washington, D.C. 20530

B. TOEPA:

Gregory T. Carlson, Project Manager

Watershed & Nonpoint Source

Programs Branch

EPA - Region 5 (WW-16]J)

77 West Jackson Blvd.

Chicago, IL 60604

Richard Murawski, Esq.

EPA - Region 5

Office of Regional Counsel, CA-29A

77 West Jackson Blvd.

Chicago, IL 60604

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Appendix D

32. Any notice or other communications given by the

United States to the Defendants shall be submitted to the

following address:

Michael L. Muenich, Esq.

3235 45th Street

Highland, Indiana 46322

XI. COSTS OF SUIT

33. Each party shall bear its own costs and attorneys’

fees relating to the matters covered by this Consent.Decree.

Should the Defendants subsequently be determined to have

violated the terms and conditions of this Consent Decree,

Defendants shall be liable to the United States for any costs

and attorneys’ fees incurred by the United States in any action

against the Defendants for such noncompliance.

XII. PUBLIC COMMENT

34. Defendants consent to the entry of this Consent

Decree without further notice. The parties agree that after

the lodging of this Consent Decree, and prior to its entry, the

United States shall, pursuant to 28 C.F.R. § 50.7, publish a

public notice of this Consent Decree and provide an

opportunity for public comments. The United States reserves

the right to withhold or withdraw its consent to entry of this

Consent Decree based upon such public comments.

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Appendix D

XI. CONTINUING JURISDICTION OF THE COURT

35. This Court shall retain jurisdiction of this action until

termination of this Consent Decree in order to enforce this

Consent Decree in any manner consistent with applicable law,

or to resolve all disputes arising hereunder as may be necessary

or appropriate for the construction, modification or execution

of this Consent Decree.

36. During the pendency of this action, any party may apply

to the Court for any relief necessary to construe or effectuate

this Consent Decree. The United States reserves all legal and

equitable remedies available to enforce the provisions of this

Consent Decree. Rueth Development Company and Harold G.

Rueth reserve all legal and equitable remedies available to

enforce the provisions of this Consent Decree.

37. Upon its entry by this Court, this Consent Decree shall

have the force and effect of a final judgment. Any modification

of this Consent Decree shall be in writing and, except for

extensions of time pursuant to this Consent Decree provided in

Section VIII (Force Majeure) above, shall not take effect unless

signed by the parties and approved by the Court.

38. This Consent Decree shall terminate after the

Defendants fully and completely fulfill all obligations under

the Consent Decree, including completing the requirements of

the Workplan, and paying any amounts, penalties or

costs that may be due under this Consent Decree. When

appropriate, Defendants shall notify the United States, at the

addresses set forth in Section X (Addresses for Submissions),

that Defendants have fulfilled all obligations of this Consent

Decree. If EPA agrees that all obligations have been fulfilled,

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Appendix D

Defendants and EPA will file a joint request with the Court to

terminate the Consent Decree. Any dispute between the parties

as to the completion of all obligations under the Consent Decree

shall be resolved pursuant to Section [IX (Dispute Resolution)

of the Consent Decree.

XIV. COMPUTATION OF TIME

39. In computing any period of time prescribed or allowed

by this Consent Decree, the day of the act after which the

designated period of time begins to run is not to be included.

The last day of the period so computed is to be included, unless

it is a Saturday, Sunday or legal holiday, in which event the

period runs until the end of the next day which is not a Saturday,

Sunday or legal holiday.

XV. JOINT OBLIGATIONS

40. All obligations undertaken collectively in this Consent

Decree by the Defendants are joint and several in nature. Should

one or more of the Defendants fail to perform, the remaining

Defendants shall be responsible for performance of the

obligation, including the payment of any stipulated penalties

that have accrued.

XVI. MISCELLANEOUS

41. The United States acknowledges that Nationwide

Permit 32, found at 33 C.F.R. Part 330 (56 Fed. Reg. 59,110,

59,144 (Nov. 22, 1991)), authorizes discharges of dredged

or fill material placed or remaining in the area depicted on

Exhibit 1, and for work undertaken in accordance with and

in compliance with the terms of this Consent Decree, all

subject to the conditions provided in the Nationwide Permit.

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Appendix D

XVII. SIGNATORIES

42.._Each undersigned representative of a party to this

Consent Decree certifies that he or she is fully authorized to

enter into the terms and conditions of this Consent Decree

and to execute and legally bind such party to this document.

FOR THE DEFENDANTS:

s/ Michael L. Muenich s/ 08/03/98

MICHAEL L. MUENICH, Esq. Dated

3235 45th Street

Highland, Indiana 46322

FOR THE UNITED STATES OF AMERICA:

LOIS J. SCHIFFER

Assistant Attorney General

Environment & Natural Resources Division

United States Department of Justice

s/ Steven E. Rusak Oct. 21, 1998.

STEVEN E. RUSAK Dated

Trial Attorney

Environmental Defense Section

Environment & Natural Resources Div.

601 D Street, N.W.

Washington, D.C. 20004

(202) 514-9275

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Appendix D

FOR THE UNITED STATES OF AMERICA:

s/ Steven A. Herman 9/30/98

STEVEN A. HERMAN Dated

Assistant Administrator for

Enforcement and Compliance Assurance

U.S. EPA

Washington, D.C. 20460

FOR THE UNITED STATES OF AMERICA:

s/ David A. Ullrich September 10, 1998

DAVID A. ULLRICH ; Dated

Acting Regional Administrator

U.S. EPA - Region 5

77 West Jackson Blvd.

Chicago, IL 60604

JUDGMENT IS HEREBY ENTERED in accordance with

the terms of the foregoing Consent Decree this 26 day of

January, 1999.

s/ [illegible]

UNITED STATES DISTRICT JUDGE

United States District Court

for the Northern District of Indiana

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APPENDIX E — STATUTORY PROVISIONS

INVOLVED

33 U.S.C. § 1311 provides in pertinent part:

§ 1311. Effluent limitations

(a) Illegality of pollutant discharges except in

compliance with law.

Except as in compliance with this section and

sections 1312, 1316, 1317, 1328, 1342, and 1344

of this title, the discharge of any pollutant by any

person shall be unlawful.

33 U.S.C. § 1344 provides in pertinent part:

§ 1344. Permits for dredged or fill material

(a) Discharge into navigable waters at specified

disposal sites.

The Secretary may issue permits, after notice and

opportunity for pubiic hearings for the discharge

of dredged or fill material into the navigable

waters at specified disposal sites. Not later than

the fifteenth day after the date an applicant

submits all the information required to complete

an application for a permit under this subsection,

the Secretary shall publish the notice required by

this subsection.

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Appendix E

33 U.S.C. § 1362 provides in pertinent part:

§ 1362. Definitions

(5) The term “person” means an individual,

corporation, partnership, association, State,

municipality, commission, or political subdivision

of a State, or any interstate body.

(6) The term “pollutant” means dredged spoil,

solid waste, incinerator residue, sewage, garbage,

sewage sludge, munitions, chemical wastes,

biological materials, radioactive materials, heat,

wrecked or discarded equipment, rock, sand, cellar

dirt and industrial, municipal, and agricultural

waste discharged into water. * * *

(7) The term “navigable waters” means the waters

of the United States, including the territorial seas.

* * *

(12) The term “discharge of a pollutant” and the

term “discharge of pollutants” each means (A) any

addition of any pollutant to navigable waters from

any point source, (B) any addition of any pollutant

to the waters of the contiguous zone or the ocean

from any point source other than a vessel or other

floating craft.

SS rae

FR or SIT A OO nag

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Appendix E

(14) The term “point source” means any

discernible, confined and discrete conveyance,

including but not limited to any pipe, ditch,

channel, tunnel, conduit, well, discrete fissure,

container, rolling stock, concentrated animal

feeding eperation, or vessel or other floating craft,

from which pollutants are or may be discharged.

This term does not include agricultural stormwater

discharges and return flows from irrigated

agriculture.