United States v. STABL, Inc. (800 F.3d 476, 2015)

WOLLMAN, Circuit Judge.

The United States and the State of Nebraska (collectively, the government) brought an enforcement action against STABL, Inc., formerly Nebraska ByProducts, Inc., for violations of the Clean Water Act and the Nebraska Environmental Protection Act. The district court granted partial summary judgment in favor of the government. Following a bench trial of the remaining issues, the district court imposed a civil penalty in the amount of $2,285,874 and denied STABL’s motion for a new trial. We affirm.

I. Background

Section 402 of the Clean Water Act, 33 U.S.C. § 1342, establishes the National Pollutant Discharge Elimination System (NPDES), a permit program that controls water pollution by regulating sources that discharge pollutants. States may seek authority from the Environmental Protection Agency (EPA) to operate a state permit program. Id. § 1342(b)-(c). States that do so must ensure that industrial users that discharge effluent into wastewater treatment plants comply with pretreatment requirements. See 40 C.F.R. § 403.10. Companies that discharge effluent into water and wastewater treatment plants can be liable for pass-through, which occurs when discharge exits a water or wastewater treatment plant and enters into waters of the United States, causing the plant to violate its NPDES permit, 40 C.F.R. §§ 403.3(p), 403.5(a)(1); for interference, which occurs when discharge inhibits or disrupts a- water or wastewater treatment plant, causing the plant to violate its NPDES permit, id. §§ 403.3(k), 403.5(a)(1); or for exceeding the effluent limitations laid out in their pretreatment permits or otherwise failing to meet permit requirements, see 33 U.S.C. §§ 1311(a), 1317(d).

STABL owned and operated a rendering plant that processed dead cattle and offal in Lexington, Nebraska. As part of Nebraska’s EPA-approved permit program, the state issued a pretreatment permit to STABL, effective April 1, 2008, that contained effluent limitations for the wastewater that STABL discharged from its facility to the city of Lexington’s wastewater treatment plant (treatment plant). The permit contained discharge parameters for ammonia, oil and grease, biochemical oxygen demand, and total suspended solids. These parameters established daily-maximum limitations and weekly-average limitations for measurements of each of the regulated elements. The permit also required STABL to monitor its discharge to the treatment plant in accordance with the foregoing requirements, to maintain records of the monitoring, and to submit discharge monitoring reports (DMRs) reflecting the results. The permit required that STABL perform flow measurements using “appropriate flow measurement devices” that were “installed, calibrated and maintained to insure [sic] ... the accuracy of the measurements” and that STABL maintain calibration and maintenance records.

The city controlled the valve that allowed wastewater to flow from STABL’s facility to the treatment plant. STABL paid the city to perform effluent testing and monitoring and used the city’s monitoring records as the basis for the DMRs that it was required to submit to the government. Jason Fagot, STABL’s general manager, signed the DMRs and certified under penalty of law that they were prepared “in accordance with a system designed to assure that qualified personnel properly gathered] and evaluate[d] the information submitted” and that the “information submitted [was] true, accurate, and complete” to the best of his knowledge and belief. The DMRs reflect numerous “ex-ceedances” — instances when STABL exceeded the limitations set forth in its permit.

In late May 2010, STABL sold its facility to Darling International Inc. (Darling). The purchase price was reduced by $1 million to account for the costs of a pretreatment system needed to bring STABL’s facility into compliance.

The government commenced this action in August 2011, alleging, among other things, that beginning in April 2008, measurements of pollutants in and properties of STABL’s discharge consistently exceeded its permit limitations; that STABL failed to sample for oil and grease as its permit required; and that beginning in 2006, STABL caused or contributed to problems at the treatment plant, causing the plant to violate its own NPDES permit.

The government moved for summary judgment, offering in support declarations of Mark Klingenstein, an environmental engineer, and Paul Marshall, an EPA compliance officer who focuses on the Clean Water Act pretreatment program. Klingenstein’s original declaration contained tables setting forth the number of violations that he believed that STABL had committed, and he submitted a supplemental declaration stating, “I prepared and/or personally verified all of the information in my initial declaration.... All tables are accurate and supported by the evidence.” The government also attached as exhibits to its motion for summary judgment the DMRs that STABL had been required to submit under the permit program. There was a DMR for each month from April 2008 through May 2010. The DMRs listed for each month the highest daily-maximum and weekly-average measurements for each effluent parameter, with the exception of oil and grease during some months. STABL argued that the DMRs were inaccurate and pointed to deposition testimony suggesting that the city’s flow meter was not calibrated, that one of the flow meters was rusted off, and that the water was tested on Tuesday, which may not have been an ideal day for testing because the water had been sitting in the tanks for several days. The district court granted the government summary judgment on liability but indicated that it would rule on the number of violations at the penalty phase of the action. The district court later granted the government’s motion that the remainder of the proceedings be conducted as a bench trial.

Within the time for expert disclosures, the government had submitted an expert report by Joan Meyer, an economics and financial analyst who gave an opinion regarding the scope of the economic benefits STABL had derived from noncompliance with the effluent limitations in its permit. Subsequently, discovery revealed that STABL and Darling had negotiated the $1 million discount in the sale price of the facility to reflect the facility’s lack of compliance with its environmental obligations. Thereafter, approximately eleven weeks before trial and well after the deadline for disclosing expert reports had passed, the government served an updated report by Meyer that included an analysis of the economic benefits of noncompliance to STABL in light of the discount in the sale price of the facility. On September 4, 2013, STABL moved in limine to exclude Meyer’s testimony and moved in the alternative for a continuance to give it time to submit its own rebuttal expert reports, to depose Meyer, and to schedule a Dauberb hearing. A magistrate judge denied STABL’s motion, noting .that STABL had “waited until two weeks before trial” to move tó exclude or for a continuance and that the government had offered STABL the opportunity to depose Meyer after the update. STABL filed a written objection to the magistrate judge’s order, which the district court implicitly overruled by ultimately basing its penalty calculation on Meyer’s updated analysis.

Over STABL’s objections, the government offered at trial the testimony of Klingenstein, Marshall, and Meyer. Marshall’s testimony at trial centered around the EPA’s inspection of STABL’s facility, the investigation of STABL’s alleged noncompliance with its effluent obligations, and general background information about the pretreatment permit program. With respect to the allegations of effluent-limitation violations,' Marshall testified that his review of the DMRs and monitoring records revealed a total of 1666 daily-equivalent effluent-limitation violations, which was slightly fewer, due to copying or arithmetical errors, than the number the government had proposed at summary judgment. He also testified that STABL did not record its oil and grease levels as required during a sixteen-month period, resulting in 62 to 64 violations for failure to monitor as required under the permit program.

Klingenstein’s testimony at trial primarily bore on the rendering process, the process for treating STABL’s wastewater, and the effect of STABL’s discharge on the treatment plant. He also testified that there were 1666 daily-equivalent effluent-limitation exceedances and that this number included a small downward adjustment from the the number of effluent-limitation exceedances he had counted at the summary-judgment stage. He stated that his original report and declarations were based on Marshall’s calculations and that he had only spot-checked the data before submitting his supplemental declaration in support of summary judgment. After noticing an error at a later date, however, he reviewed every single piece of data and uncovered additional errors. Correcting the errors ultimately reduced the total number of effluent-limitation exceedances by three.

The district court determined that STABL’s discharges exceeded the requirements of its permits as follows: 76 daily-maximum and 90 weekly-average exceedances for ammonia; 68 daily-maximum and 76 weekly-average exceedances for biochemical oxygen demand; 42 daily-maximum and 21 weekly-average exceedaneés for oil and grease; and 10 daily-maximum and 23 weekly-average exceedances for total suspended solids. The district court concluded that this resulted in a total of 196 daily-maximum violations and 1470 “daily violations” from the weekly-average exceedances, calculated by multiplying the 210 total weekly-average exceedances by seven — the number of days in a week. The district court concluded that there were 63 failure-to-monitor violations. It agreed with the government regarding the number of pass-through and interference violations, but disregarded the pass-through and interference violations altogether to avoid “duplicate counting.” The district court also reduced the total number of effluent-limitation violations by 196 — the number of daily-maximum exceedances — to avoid the potential for double-counting. The district court imposed a penalty of $2,285,874, which equaled twice the economic value that Meyer testified that STABL had derived from noncompliance. The district court stated that it had reached this number because “a civil penalty in an amount twice [STABL’s] economic benefit will serve the interests of justice and help to deter others from engaging in similar non-compliance.” Following the denial of its motion for a new trial, STABL filed this appeal.

II. Summary Judgment

STABL challenges the district court’s grant of partial summary judgment on liability for the effluent-limitation and failure-to-monitor violations. We review the district court’s grant of summary judgment de novo. Dahl v. Rice Cty., Minn., 621 F.3d 740, 743 (8th Cir.2010). We view the facts and inferences derived from those facts in the light most favorable to the nonmoving party. Id. To succeed at summary judgment, the moving party must demonstrate that there is no genuine dispute as to any material fact and that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The nonmoving party must then come forward with specific facts showing that there is a genuine issue for trial, Dahl, 621 F.3d at 743, either by citing to parts of the record showing that there is a genuine dispute for trial or by demonstrating that the moving party has not established the absence of a genuine dispute or cannot produce admissible evidence supporting the absence of a dispute, see Fed.R.Civ.P. 56(c)(1).

A. DMRs and Monitoring Records

The Clean Water Act makes it unlawful to operate a polluting source facility in violation of pretreatment standards or a permit’s pretreatment requirements. See 33 U.S.C. §§ 1311(a), 1317(d); 40 C.F.R. § 122.41(a). A discharge that exceeds effluent limitations in a permit is “the archetypal Clean Water Act violation, and subjects the discharger to strict liability.” United States v. Allegheny Ludlum Corp., 366 F.3d 164, 175 (3d Cir.2004). “Thus, without more, to violate a[n] NPDES permit is to violate the Act.” Chesapeake Bay Found. v. Bethlehem Steel Corp., 608 F.Supp. 440, 451 (D.Md.1985) (citing EPA v. State Water Res. Control Bd., 426 U.S. 200, 205, 96 S.Ct. 2022, 48 L.Ed.2d 578 (1976)). The Nebraska Environmental Protection Act similarly makes it unlawful to violate a permit condition or limitation. Neb.Rev.Stat. § 81-1508.02(l)(b). As the Clean Water Act was the source of many provisions found in the Nebraska Environmental Protection Act, see State ex rel. Wood v. Fisher Foods, Ltd., 254 Neb. 982, 581 N.W.2d 409, 415 (1998), and as the parties have not argued that the standards for liability differ under the two acts, we assume that the requirements for liability for violation of a permit limitation or condition under the Nebraska Environmental Protection Act mirror the requirements for liability under the Clean Water Act.

The DMRs and monitoring records were the primary evidence on which the government relied to establish the effluent-limitation violations. If the DMRs were admissible and are sufficiently probative, they demonstrate that STABL exceeded the effluent limitations in its permit. STABL argues that the DMRs and monitoring records were inadmissible and did not constitute a sufficient, basis for the district court’s grant of partial summary judgment.

Permit holders have a duty to monitor their wastewater discharges, maintain monitoring records, and submit to the government DMRs summarizing the results of that monitoring. 40 C.F.R. §§ 122.41(j), (1)(4), 123.25. Federal regulations require that samples and measurements taken for the purpose of monitoring be representative of the monitored activity and that those submitting DMRs certify that, “[bjased on [their] inquiry of the person or persons who manage the system, or those persons directly responsible for gathering the information, the information submitted is, to the best of [their] knowledge and belief, true, accurate, and complete.” 40 C.F.R. §§ 122.22(d), 122.41