United States of America v. Smith

Filing 145

Order entered on Phase II non-jury trial held on June 2-3,2014. Signed by Judge Kristi K. DuBose on 7/24/2014. (Attachments: # 1 Attachment A) (mcb)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,

CIVL ACTION NO. 12-00498-KD-C

v.

HAMILTON SMITH.
Defendant.

ORDER
This rnatter came before the Court for a non-jury trial on June 2-3,2014 ("Phase II"), at which
time the issue of remedies concerning Dams/roads A, B, D and E, were

tried.

Upon consideration of the

arguments, and documentary and testimonial evidence presented, and all other pertinent portions of the
record including the parties' post-trial briefs (Docs. 137-142), the Court finds as follows.

I.

Statement of the Case

& Factual Background

This is a civil action arising under the Clean Water Act ("CWA").r The purpose of the CWA is
to restore and maintain the chemical, physical, and biological integrity of the Nation's

waters.

33 U.S.C.

$ l25l(a). Accordingly, the CWA prohibits all discharges of pollutants, including dirt, rock, clay

and

other materials, into "waters of the United States" except as authorized by a "section 404 permit" granted

under the CWA, or as provided in one of the statute's permit exemptions. Section 404 requires that,
before discharging dredged

infill material

a permit from the Secretary of the

into jurisdictional waters of the United States, you must obtain

Army.

Defendant Hamilton Smith ("Smith")'s family owns (and Smith manages) approximately 800
acres of real properly in Baldwin County,

Alabama. The property contains wetlands

and streams that are

protected by the CWA, including Dennis Creek and three (3) unnamed tributaries that flow into Dennis
Creek, which are referred herein as Creek A, Creek B, and Creek

I

E.

Dennis Creek flows directlv into

The CWA makes it illegal to introduce pollutants from any point source into the navigable waters of the
United States without a permit. 33 U.S.C. $$ l3l t(a), 1342.

the Tensaw River, which is three (3) miles away from Smith's property, and ultimately into Mobile Bay,

approximately l5 miles down the Tensaw

River.

Between approximately 1998-2004, Smith built five

(5) dams on his properly at the cost of $ 180,000 (Doc. 90 at 56; Doc. 103 at 69), which provided roads
and resulted in several lakes, referenced herein as Dams/roads A, B, C, D, and

E.2

Smith did not request

permission from the Government before making these improvements, and did not apply for Section 404

CWA permits.3 As such, the Government sued Smith for CWA Section 404 permit violations.
The Government has established, and Smith does not dispute, that the tributaries at issue are

jurisdictional waters of the United States and that he built the dams/roads using point sources that
discharged pollutants. Smith also does not contest that one

(t)

dam/road, Dam/road E, was built in

violation of the CWA Section 404 permitting requirement.
At the Phase I trial (liability only), Smith contended that Dams A-D did not require a Section 404
permit because they were built in compliance with the CWA permitting exemption for forest roads (and

for silviculture).4 The forest roads exemption covers the discharge of dredged or fill material "for the
purpose of construction or maintenance of farm roads or forest roads ... where such roads are constructed

and maintained,

in

accordance

with best management practices, [BMPs] to assure that flow

and

circulation patterns and chemical and biological characteristics of the navigable waters are not impaired,

that the reach of the navigable waters is not reduced, and that any adverse effect on the aquatic
environment

will be otherwise minimized." 33 U.S.C. $ 1344(D(IXE). This permitting

exemption

2 In addition to constructing dams/roads, Smith harvests timber and hunts quail on is properfy. From
2000-201l, Smith grossed $100,000 from timber sales, $50,000 of which were for timber sales on the portion of his
property where the Dams/roads are located. (Doc. 90 at 58-60). In 2006, Smith grossed $72,000 from a quail
hunting business on his properly (Dennis Lake Wing Club); and from2007 forward grossed $152,000/year from this
business. (Doc. 90 at 52;Doc. 103 at 69).
3 33 U.S.C. $ l3a4(a). To establish a prima facie case of a violation of Sections 301 and 404, the
Government must prove that Smith is a l) person who 2) discharged a pollutant 3) from a point source 4) into waters
of the United States 5) without a permit issued under CWA section 404. 33 U.S.C. g$ l3l l(a), 1344 and 1362
(definitions); U.S. v. RGM Corp.,222F.9upp.2d780,786 (E.D. Ya.2002); U.S. v. Board of Trustees of Fla. Kevs
Cmty. Colleee, 531 F.Supp.267,274 (S.D. Fla. l98l). Under the CWA statutory scheme, the Army Corps of
Engineers is the agency that issues CWA permits for the dredge and fill of navigable waters, which can include
wetlands. 33 U.S.C. $ 1344; Rapanos v. United States, 547 U.S. 715 Q006).

4 For the "silviculture exemption" to apply, "the activities ... must be part of an established (i.e., on-going)
farming, silviculture, or ranching operation...." 33 C.F.R. g 323.4({(l)(ii).

requires that the roads be constructed

("BMPs").

in

accordance

with 15 mandatory Best Management

Practices

33 C.F.R. $ 3n.a@)(6Xi-xv); 40 C.F.R. $ 232.3(c)(6)(i-xv). To qualify for the forest roads

exemption, Smith bore the burden

of

establishing that his activities satisfied the exemption's

requirements. U.S. v. Brink,795 F.Supp.2d 565,582 (S.D. Tex.201l); Avoyelles Sportsmen's League.
Inc. v. Marsh,715F.2d8g7,92615'h Cir. 1983); U.S. v. Akers,785F.2d8t47t5F.zd8g7,8l9
1986); In re Carsten, 2l

I B.R.

19th

Cir.

719,732 (Bkrtcy. D. Mont. 1997).

At trial, the Government argued that Smith failed to comply with the mandatory BMPs such that
he could not avail himself of the forest road exemption, and moreover, even

if

he could, he

still would not

be entitled to the exemption because his activities were subject to "recapture"5 -- an exception to the
forest roads exemption. To support recapture applying to Smith's dams/roads, the Government asserted
that because they altered the ecosystem and affected the hydrology of the jurisdictional waters, the use
and the reduction or reach/circulation of the waters was altered.

During the Phase I trial, which dealt only with liability, the jury heard the testimony and
evidence, and considered Smith's CWA liability for Dams/roads A, B, C, and

liable for Dams/roads

A

D.

The

jury found Smith

and B (that the forest road exemption applied but so did recapture which

removed that exemption).6 The

jury found Smith was not liable for Dams/roads C and D (that the forest

road exemption applied and recapture did

not).

Thereafter, the Government filed a post-trial motion for

judgment as a matter of law regarding Dams/roads C and D (Doc. 100), which the Court granted as to D?

5 Recapture refers to the concept that, despite exceptions to the CWA permitting requirement, if dam
construction and resulting discharges significantly alter the "use" of navigable waters and the reduction or
reaclr./circulation of such waters, then the Section 404 exemptions are inapplicable. Section 1344(DQ) reinstates
the permit requirement where the discharge of dredged or fill material into the navigable waters is "incidental to any
activity having as its purpose bringing an area of the navigable waters into a use to which it was not previously
subject, where the flow or circulation of navigable waters may be impaired or the reach of such waters reduced ...."
To fall within the exception, both conditions (new use q41lreduction or reach/circulation of waters) must be shown
to apply. Greenfield Mills. Inc. v. Macklin, 361 F.3d g34,g4g and 953 (7th Cir. 2004).
6 Dams/roads A and B were found (by the jury) to be in compliance with all 15 MBPs for the forest road
exemption but were subject to recapture under Section 404(f)Q).
7 The Court determined that there was insufficient evidence for the jury's determination that Dam/road D
complied with BMP 6 (minimal impact on aquatic vegetation) and BMP 7 (movement of aquatic species).

but denied as to C (upholding the jury's verdict on

C).

(Doc. 106). At a later date, this case proceeded

to Phase II of the trial (remedies only) regarding Dams/roads A, B, D and

E.

For purposes of Phase II,

the Parties agreed that Dams/Roads A, B and D are located in protected streams and/or wetlands and that
each of the dams/roads created impoundments of water of various sizes that inundated protected streams
and/or

wetlands. Smith also admitted liability for Dam/road

E.

Phase

II

then addressed the remedies

and damages for the admitted or adjudicated CWA violations by Smith for Dams/roads

A, B, D and

E.

As damages, the Government seeks injunctions, compensatory mitigation, and civil penalties.
Specifically, the Government asserts the following relief against Smith:

'

Permanent Injunction: a general permanent injunction forever prohibiting Smith's discharge of
pollutants into waters of the United States without a permit in violation of CWA section 301(a),
33 U.S.C. $ 13ll(a). (Doc. 133 at4).

Temporary Restorative Injunction (Restoration Plan): a restorative temporary injunction relating
to a restoration plan (based on the findings of William L. Kruczynski- "Dr. Kruczynski") (Docs.
138-1, Doc. l4i-l (as amended)) requiring Smith, from October l, 2014 through October 1,
2015, at his own expense and at the direction of the EPA, to fully restore the site by returning the
violation areas to their pre-violation conditions through the removal of all unauthorized fill (the
earthen material that comprises the dams/roads) from the protected streams and wetlands at the
site and planting new vegetation to restore the pre-violation forested wetland condition. (Doc. 133
at 4, 6-7). Included in this request is removal of the dams/roads because there are other ways to
cross the streams (e.g., bridges), or at the minimum, Dams/roads A and B should be redesigned
via culverts and to restore the flodcirculation of Creeks A and 8.8 (Id. at 5-6, 8). Additionally,
the Government seeks 3 years of annual monitoring/reporting to the EPA to ensure the plan is
working and the site is being restored. Qd. at 7-8). ($e9 also Docs. 138-1, l4l-l). The
Govemment estimates the costs of restoration as $89,900. (Doc. 138-l at l0; Doc. 141-l at 1 1).
Compensatory Mitigation: compensatory mitigation for any unauthorized fill Smith cannot
remove, or that the Court determines should be allowed to remain at the site, given the statute's
policy of "no net loss" of wetlands. (Doc. 133 at 4-5). For the Govemment, this addresses
both permanent and temporary losses since the fill has been in place (the time of the violations)
from 2003 to the present, as during that time the wetlands and streams have not been functioning
as they should and there should be compensatory mitigation for those losses. (Id. at 5,9).

'

Temporal Losses. Compensatory mitigation for temporal losses of stream and wetland
function due to Dams A, B, D, and E and their impoundments until they are restored, in

8 During the Phase II trial and in post-trial briefing, the Government also sought restoration as to
Dam/road C (that the water level of Dam /road C be lowered to prevent back-flooding connected to areas upstream
of Dams/roads A,B, and D). (See, e.g., Doc. 138-1 at2,4-6,8,
However, during the liability phase of hial,
Phase I, the jury concluded that Smith satisfied the forest road exemption and was not subject to recapture for the
Dam/road C impoundment. The Government is not in a position to demand any form of relief as to Dam/road C and

1l).

any such request is DENIED.

4

the form of mitigation

'

' Civil

107; Doc. 133 at9-13; Doc. 137

at6,20).

Mitigation Bank Credits. The Government seeks an order specifuing that Smith satisf,,
the requirement to mitigate for temporal losses for more than decade by purchasing
credits at an existing mitigation banke in the service area, or nearby within the State oi
Alabama, in recognition of the preference under applicable regulations (40 C.F.R. $
230.93(b) for mitigating through mitigation banks rather than through other forms of
mitigation that involve further temporal losses and increased risk of failure. (Id.)

o

'

credits. (Doc.

Post-trial, the Government produced a specific figure of $217,365 and requests
that this Court require Smith to purchase credits for Dams/roads A, B and E
equivalent to 20o/o of the mitigation that would have been required for the
impacts if they had been permitted, to offset the functional losses that occurred
during the 12 years the violations remained unabated. (Doc. 137 at6,l4). The
Government also seeks credits equivalent to 15%io for Dam/road D to reflect that
its size decreased in 2010 aftera large culvertwas installed. (Doc. 137 at l5).
The Government adds that the temporal mitigation request will address only the
impoundment and not the filling impacts at Dams/roads A, B, and D based on the
expectation that these dams will be brought into compliance with the forest road
exemption and will not impound water "in which case the remaining fill would
not require a permit." Gd.)

Compensation for permanent impacts (none if restoration is complete). (Doc. 133 at l3).

Penalties. The Government seeks civil penalties against Smith

in the amount of

$1'500'000 for the Dams/roads A, B, D and E, pursuant to 33 U.S.C. $ l3lg(d), depending on the
other relief being ordered in full by the Court.

III.

Conclusions of Law

Guidingthe Court's analysis of the appropriate relief to be awarded in this case is the principle
that while CWA violations may be remediated in a variety of ways, restoration of a violation site to its
pre-violation condition is the preferred
F.2d I 151, I l6l-l165
See also 9.g., Ohio

(l't Cir.

v. United

remedy. United

States v. Cumberland Farms

1987); U.S. v. Bedford ,2009
States Dep't

of Conn.. Inc., 826

WL 149t224, *74 (E.D. Va. May 22,2009).

of the Int., 880 F.2d 432, 443-444, 457 (D.C. Cir.

1989)

(recognizing that the common law concept of "legal" damages was unacceptable to Congress and that
restoration was the preferred remedy). Restoration, meaning

to offset the impacts of violations

and

9

Explained by the Government as for-profit private enterprises where individuals locate properties
suitable for restoration, develop a restoration plan, take that to the Corps ofEngineers to obtain approval, and ifthey
can show a benefit associated with the work they will do, the Corps approves the plan and authorizes the company,

the mitigation bank, to sell credits to the public. (Doc. 133 at 9-10). One restoration wetland credit is
approximately $12,000 and the stream restoration credits are $75 per linear foot. (!d. at 13).

)

remove the violations themselves to return the site to its pre-violation

state. The Court

agrees that site

restoration is a foremosl consideration, and as such, has given great weight to the significance of
accomplishing restoration, over other remedies, when assessing remedies. The Court has also
considered that the main purpose of imposing any
others from committing future

and

violations. Tull v. United States,43l U.S. 412,422-425 (1987); United

States v. Smithfield Foods. 972F. Supp. 338, 352

A.

civil penalties is deterrence -- to deter the violator

(E.D.Ya. 1997).

Injunctive Relief
The Government seeks entry

of: l)

a permanent injunction prohibiting Smith's discharge

of

pollutants into waters of the United States without a permit in violation of CWA section 301(a), 33 U.S.C.

$

I31I

(a); and 2) a temporary injunction requiring Smith, as his own expense and at the EPA's direction,

to fully restore the site via its proposed restoration plan.r0 (See also Doc. 133

at4;Doc.I37 at5,7).

In the event of a violation, the CWA authorizes civil judicial enforcement, allowing the United
States

to seek "appropriate relief, including a permanent or temporary injunction, for any violation."

U.S.C.

$ l3l9(b). However, an injunction

does not issue automatically upon

33

a finding of a CWA

violation. Weinberger v. Romero-Barcelo, 456 U.S. 305 (1982); Amoco Production Co. v. Village of
Gambell. AK,480

U.S.53l (1987)." District courts are not "mechanically obligated to grant

injunction for every violation of the
does not require a district court

law."

Weinberger, 446 U.S. at

313. More specifically,

an

the CWA

to grant injunctions for all violations of the act, but instead the CWA

"permits the district court to order that relief it considers necessary to secure prompt compliance with the

Act."

Id. at320.

1.

Permanent Iniunction

As to the Government's request for entry of a permanent injunction, there is no basis for this

l0 By retuming the violation areas to their pre-violation conditions

through the removal

of

all

unauthorized fill from the protected streams and wetlands at the site and planting new vegetation to restore the
pre-violation forested condition.
I I In Weinberger and Amoco Production Co. v. Village of Gambell. Alaska, both cases involving
violations of environmental statutes, the Supreme Court reversed the granting of preliminary injunctions that were
given without considering irreparable harm or a balance of the equities.

request and such is DENIED.

A permanent injunction prohibiting Smith from violating the CWA

and

Section 404 permit requirements (i.e., to permanently enjoin Smith from constructing any further dams,
discharging and/or creating impoundments), is superfluous and redundant. Smith, as a matter of federal

law, is already "so prohibited." In the event Smith violates the CWA and/or Section 404 permit
requirements again, that is a matter for another

day.

Indeed, before the Court could enter such an order,

the Government would have to show the likelihood of afuture CWA violation by

Smith.

United States

v. Sea Bay Dev. Corp.,2007 WL 1378544, *3 (E.D. Va. May 8,2007); United States v. Fabian,522
F.Supp.2d 1078,1094-1095 (N.D. Ind. Mar.

2,2007).

The Government has presented no such evidence.

Additionally, implementation of the plan will cure the harm caused by

2.

the

prior actions.

TemporaryRestorativelnjunctionfRestoration)

As part of restoring and maintaining the chemical, physical and biological integrity of

the

Nation's waters, the CWA authorizes the Government to commence a civil action for appropriate relief;
including injunctions, for any violation for which it is authorized to issue a compliance order under 33

U.S.C.

$

1319(a). Restoration

contemplated by the

of

illegally destroyed wetlands is one type

of

injunctive relief

CWA.33 U.S.C. $ 1319. Courts have recognized a mandatory duty to

restore

intentionally filled wetlands, unless the equities weigh against restoration. See, e.g.. United States v.
Cumberland Farms,826F.2d 1151, ll6l-116511" Cir. l9S7); United States v. Van Leuzen, Sl6 F. Supp.

ll7l, ll80 (S.D. Tex.

1993). "Primary guidance for the imposition of the restoration remedy

contained in U.S. v. Sexton Cove Est., Inc., 526 F.2d

l2g3,l30l

(5th Cfu.

1976)." U.S. v. Weisman,

is

489

F. Supp. 1331, 1342 (M.D. Fla. 1980) (involving the identification of point source equipment used to
build a road across a wetland to a private residence).

Courts have held that injunctive relief via

a touch of

a

restoration plan must:

l)

confer maximum

2) be practical and feasible from

an

environmental and engineering standpoin! and 3) bear an equitable relationship to the degree and kind

of

environmental benefits tempered with

equity,

wrong the plan is intended to remedy (considers the financial recourses of defendant), and 4) include
consideration

of a defendant's objections. U.S. v. Bailey,5Tl F.3d 791,805

18'h

Cir. 2009); U.S. v.

Cundiff, 555 F.3d 200,21616tr' Cir. 2009); U.S. v. Deaton, 332 F.3d 698, 71414'h Cir. 2003); EPA

Injunctive Relief Requirements

in

Section 404 Enforcement Action

http:llwater.epa.gov/type/wetlands/outreach/factl5.cfm

at 2

(Sept.

29, 1999),

(last visited July 17,2014) (citing Cumberland

Farms, 826 F.2d at 1164); U.S. v. Sexton Cove Est.. Inc.,526 F.2d 1293, 130115th Cir. 1976)); U.S. v.
Donovan, 466F. Supp.2d 595,598 (D. DeI.2006); United States v. Robinson,570 F. Supp. 1157,1164

(M.D. Fla. 1983); United States v. Weisman, 489 F. Supp. 133l,1342-1343 (M.D. Fla. 1980).
The CWA grants district courts the authority to order restoration of jurisdictional wetlands that
have been unlawfully filled

to remedy the harm resulting from the violations. Ogeechee{anoochee

Riverkeeper. Inc.v.T.C.Logging. Inc.,2010
States v. Donovan,466 F.Supp.2d595,598

damaged

WLl009797,at*2 n.2(S.D.Ga.Mar. 18,2010);United

(D. DeI.2006). And courts frequently order restoration of

or destroyed wetlands as injunctive relief for violations of wetland permitting requirements.

United States v. Deaton , 332 F,3d 698, 71414tr' Cir. 2003); United States v. Cumberland Farms of Conn."
Lnc.,826 F.2d, 1151, I164-1165 (1" Cir.

1987). There

are two (2) prerequisites to be satisfied before

any consideration of the restoration plan itself: 1) the court must have jurisdiction over the portion of the

property or activity to be directly affected by the restoration plan, and 2) the court must conduct a hearing

in which the merits, demerits, and alternatives to the restoration plan are fully developed. See, e.g.,
Weisman, 489 F. Supp.

at 1342-1343 (applying the factors).

Once these preliminaries are satisfied,

federal courts analyze the 3-4 factors (depending on the court) referenced

supra. "The

record should

establish 'that the court's choice of the specific restoration ordered was based upon a comprehensive
evaluation of the environmental factors involved and the practicalities of the

situation."'

Weisman, 489

F. Supp. at 1342-1343 (citing Weiszmann v. Dist. Eng.. U.S. Army Corps of Eng., 526 F.2d 1302, 1304
15tr'

Cir. 1976)). Further, courts have found restoration orders equitable

even when

it placed a "heavy

burden" on the defendant, because he had no one but himself to blame for the predicament. Cumberland
Farms of Conn., Inc., 826 F.2d at I 165.

As for the prerequisites to a restorative injunction, there is no dispute that this Court has
jurisdiction over the affected portions of the site on Smith's property, and moreover, the hearing
requirement is satisfied as the restoration plan was part of the Phase

II

bench trial on remedies. Having

satisfied these prerequisites, the Court finds that from all the evidence and in keeping with the CWA's
goal of "restoring and maintaining the chemical, physical, and biological integrity of the Nation's waters"

33 U.S.C. $ 1251(a) -- that entry of a restoration plan and temporary restorative injunction is proper

as

restoration of the Smith property is necessary and justified. Friends of the Earth" Inc. v. Laidlaw Envtl.
Servs. (TOC). Inc., 528 U.S. 167, 193 (2000) (federal courts should narrowly frame relief

to fit

the

precise facts ofthe case).

The Government's expert, Dr. Kruczynski, explained that the trees located within the wetland
area

of Smith's property drop their leaves forming an organic material known

if not absorbed within the wetland

as

detrifus. This

detritus,

area, normally would be flushed out into the estuaries and waters

through the tidal creek, in combination of natural water movement. The detrital material, according to
testimony, forms the base of the food chain and is relied upon by many aquatic organisms which o'man is
the ultimate beneficiary." Weisman,489 F. Supp at

acres

of

1345. The dams/roads fill

covered and destroyed

wetland vegetation, thereby eliminating this acreage from performing these food chain

productions. Additionally, despite the culverts Smith placed under the fill, the dams/roads impede the
flow of water which may carry and distribute detritus. As stated in Weisman,489 F. Supp. at 1346-1347
and applicable to the facts of this case:

The intricate web of interdependence which characterizes our environment requires that we look
beyond the present and immediate in assessing the value of any particular element of the
environment or in gauging the harm that will accrue from its destruction. Injury to the production
and export of detritus from these wetlands, discussed above, is but one example[.] ... Similarly,
the new road[s]' interference with the natural flow of water through the area now covered by fill
will ultimately change the flushing characteristics of the wetlands... The reduced elevation and
flow of water over a period of time will dry out the soil in .. [certain] area[s] .... and convert it to
upland. Conversely, the wetland area[s]... may be adversely affected by higher water elevations,
again caused by the interference of the new road[s] with the expansion of rising waters in the tidal
creeks. These higher water elevations may be too high to sustain emergent wetland vegetation
and may eliminate existing species of plants and habitat of animal species... The Court finds that
the destruction and alteration of these wetlands has and will detrimentally affect other important
environmental characteristics of surrounding wetlands.... These findings of harm effectively
foreclose one alternative: the alternative of doing nothing. Clearly some specific remedy is
required....
Thus, the Court finds that restoration
tempered with a touch of equity.

will confer maximum environmental

benefits to the subject site,

Second, as

to practicality, "[t]he question is whether the proposed restoration plan,

theoretically could provide the maximum environmental benefits,

is

achievable as

a

which

practical

matter...This calls for consideration of the feasibility and cost-effectiveness of the proposed plan."
Weisman, 489 F. Supp.
restoration

will

at 1348. In this regard, evidence indicates that the approximate cost of

be $89,000, which the Court finds to be reasonable.

Third, regarding the equitable relation to degree of wrong, "[t]he duty to restore an intentionally

filled wetland is mandatory, absent equities." U.S. v. Van Leuzen, 816 F. Supp. l l7l, 1180 (S.D. Tex.
1993) (finding that the landowner lacked any equities and, thus, had mandatory duty to completely restore

wetland he intentionally had filled, remediate damage caused by lost use of wetland, and take steps to

undo damage inflicted upon wetlands permit program by his open and notorious violations of permit
requirements of CWA, and by his disregard for cease and desist orders issued by Corps and

EPA).

The

Court must assess whether the proposed restoration is equitable to Smith in light of the degree and kind

wrong

it is intended to remedy (looking at for

instance, the degree

of

of harm caused and a defendant's

financial inability to comply). Intentional conduct on the part of a defendant eviscerates any equitable
arguments against restoration. United States v. Pozsgai

,

999 F.2d 719, 73613'd

Cir. 1993) (holding that

"repeated noncompliance with the Act and with the Corps' directives to stop filling foreclose any such
equitable argument[]"); United States v. Robinson, 570 F. Supp. I 157, 1165 (M.D. Fla. 1983) (assessing a

defendant's financial resources and finding defendants' objection that they lacked financial means to
accomplish the restoration plan lacked

merit).

Upon consideration of all the evidence and testimony at

trial, the Court finds that the proposed restoration is equitable to Smith.
Fourth, the Court has considered Smith's objections with regard to the specifics of the restoration

plan. In part, the Government

has agreed (post-trial) with some

mooted those via filing an amended restoration plan (Doc.

of Smith's

objections and as such,

141-l). The Court

has addressed the

remaining objections in the approved restoration plan.

Accordingly, the Government's request for entry of a temporary restorative injunction against
Smith is GRANTED in part and the Court ADOPTS in part the Government's amended restoration
plan (Doc.

l4l-l)

as revised by this

Court.

(See Attachment
10

A hereto). Moreover, it is ORDERED

that the Annual Reports regarding the status of the restoration plan shall be filed with this Court.

B.

Compensatory Mitigation
Smith opposes the Government's request for compensatory mitigation, and justifiably so based on

the wording of the regulations.r2 Specifically, this case primarily concerns an exemption

to

the Section

404 permit requirements, such that there are no permits involved and there is no indication that there
be permits involved in the

properfy

-

future.

will

There has also never been a "mitigation site" designated on Smith's

an item which is a necessary point of measure/reference for these

regulations. In other words,

this is a non-permit case and the compensatory mitigation regulations are simply inapplicable.

As to Dam/road E, Smith conceded that such was not an exempt forest

road. According to the

Government, "Dam E does not serve a forestry purpose and cannot be made compliant with the forest

road exemption....[so the plan]...proposes...E be fully restored to...pre-violation conditions." (Doc.

138-l at

l).

In otherwords, the Government seeks full restoration of Dam/road E, and no permit. As to

the remaining dams/roads, the jury concluded that Dam/road C was an exempt forest road. The jury

found that while they were forest roads, recapture applied to Dams/roads
concluded that Dam/road

A

and B, and the Court

D did not meet two (2) of the 15 BMPs even though it was a forest road.

According to the Government, "the Proposed Restoration Plan provides for reconfiguration of Dams A, B
and D so that they are made eligible for the forest road exemption[.]" (Doc. 138-1 at
either party's proposed restoration plan

as forest roads

-

Regardless,

will bringall of these violations into compliance with

road exemption criteria, such that all

404(fxlXA)

l).

of

Smith's dams/roads

will be fully

the forest

exempt under Section

i.e., no Section 404 permit ("after the fact" or otherwise)

will

be required.

Moreover, the following excerpts from the compensatory mitigation regulations highlight their
apparent inapplicability to non-permitted (exempt) scenarios:

12 Smith opposes any form of compensatory mitigation as such only applies to permitted scenarios, and
because such evidence is inadmissible as no Government expert addressed this relief in their reports and no
information as to the specific costs for such was presented to Smith until the eve of trial. (Doc. 133 at 17-18).
Moreover, Smith contends that the Government's request as to temporal losses is improperly based on 12 years of
time given that the Government requested a tolling agreement from Smith for five (5) years to resolve the issues,
and moreover, only 11 years have passed since 2003. Qd. at
Smith contends that the five (5) years of
required tolling by the Government should not be counted against him.

l9).

1l

The Regulations define a "compensatory mitigation project" as "compensatory mitigation
implemented by the permittee as a requirement of a DA permit (i.e., permittee-responsible
mitigation)...." 40 C.F.R. 5230.92 (emphasis added).
Mitigation bank means a site, or suite of sites, where resources (e.g., wetlands, streams, riparian
areas) are restored, established, enhanced, andlor preserved for the purpose of providing
compensatory mitigation for impacts authorized by DA permits. A mitigation bank sells
compensatory mitigation credits to permittees whose obligation to provide compensatory
mitigation is then transfened to the mitigation bank sponsor..." Id. (emphasis added).
"Permittee-responsible mitigation means....activity.. .by the permittee...to provide compensatory
mitigation for which the permittee retains full responsibility." Id. (emphasis added).

"Temporal loss is the time lag between the loss of aquatic resource functions caused by the
permitted impacts and the replacement of aquatic resource functions at the compensatory
mitigation site. Higher compensation ratios may be required to compensate for temporal loss.
When the compensatory mitigation project is initiated prior to, or concunent with, the permitted
impacts, the district engineer may determine that compensation for temporal loss is not necessary,
unless the resource has a long development

time."

Id. (emphasis added).

The Government relies upon the Corps CWA guidelines, 33 C.F.R. $ 320.4(r), 40 C.F.R. S
230.10,55 Fed. Reg. 9210 (Mar. 12,1990), to discuss the three (3) components of mitigation.
However, those "policies shall be applicable to the review of all applications for DA permits."
33 C.F.R. $ 320.4 (emphasis added). Subsection (r) provides that mitigation is part of the
"review and balancing process on...permit applicationsfl" adding that consideration of mitigation
occurs as part of "the permit application review processl.]" 33 C.F.R. $ 320.a(r) (emphasis
added). Part230.l0 references compliance with the guidelines' requirements in order to receive a
permit, addressing what discharge of dredged or fill material shall be permitted.
Similarly, the Federal Regulations 55 Fed. Reg. 9210 (Mar. 12,1990) provide, in part, as follows:

...The agencies developed the MOA in response to questions that had arisen with respect
to mitigation requirements under the Guidelines applicable to the review of applications
for standard Section 404 permits....we anticipate that the MOA will increase the
effectiveness of the Section 404 program by reducing delays in permit processing,
minimizing ambiguity in the regulatory program and by providing agency field personnel
with a clearer understanding of the procedures for determining appropriate and
practicable mitigation under the Guidelines...The MOA interprets and provides internal
guidance and procedures for implementing existing Section 404 permit
regulations....The MOA also maintains the flexibility of the Guidelines by expressly
recognizing that no net loss of wetlands functions and values may not be achieved in each
and every permit action .. ...The Guidelines establish environmental criteria which must
be met for activities to be permitted under Section 404......The Guidelines are the
environmental standard for Section 404 permit issuance under the CwA....Mttigation
requirements shall be conditions of standard Section 404 permits....This MOA shall take
effect on February 7, 1990, and will apply to those completed standard permit
applications which are received on or after that date.
12

33 c.F.R. $ 332.3(b) concerns requirements for mitigation DA permits (permitees).

40 C.F.R. $ 230.93(b) concerns compensatory mitigation to offset environmental losses resulting
from unavoidable impacts to waters of the United States "authorized by DA permits[]" and
discusses mitigation requirements for permitted scenarios.
The temporal loss statute is concemed with mitigation for DA permit applications (i.e., those
situations where a DA permit has been issued (or in the process of being issued).

The stated purpose of this portion of the CFR is to establish standards and criteria for the use of
all types of compensatory mitigation and in-lieu fee mitigation to offset unavoidable impacts to
US waters authorized through the issuance of DA permits under Section 404. 33 C.F.R.
$332. I (a).

'
'

The general compensatory mitigation requirements discusses the existence of a DA

c.F.R.

permit.

33

$ 332.3.

Section 332.1(b) provides: (b) Applicability. This part does not alter the regulations at g 320.4(r)
of this title, which address_the general mitigation requirements for DA permits . - .
Despite the Government's assertion that an award of temporal losses in this case is "consistent

with federal regulations" "[u]nder the plain language of the statute" (Doc.

137 at 6-7), such is not the case

as the regulations only concem permitted situations.13

Further, the Court has been unable to find a single case where compensatory mitigation was
awarded when no permits were involved and an exemption

applied. And while given

the opportunity to

do so, the Government failed to provide the Court with any case law showing compensatory mitigation
awarded as a remedy without a permit and with an

exemption. Instead, the cases relied upon and cited

by the Government, to assert that the compensatory mitigation law (mitigation banks andlor temporal
loss) applies here, actually deal with distinguishable permrring situations.ra

13 Further, the Govemment asserts that this Court has the broad equitable authority to require
compensatory mitigation for any permanent impacts to the Nation's waters, including any part of a protected stream
or wetlands that cannot be fully restored due to a CWA violation. However, this ignores the very wording of the
permitting regulations - that they are regulations and forms of relief which apply to permitted scenarios. The Court
has neither the type or scope of equitable relief characterized by the Government, nor can it unilaterally rewrite the

regulations so they apply to non-permitted situations.

14 The Government relies upon Ohio Valley Environ. Coalition v. Aracoma Coal Co., 556 F.3d 177,
204'205 (W. Va. 2009); however, that case dealt with challenges to the issuance of four (4) permits allowing the
13

Under the unique circumstances of this case" and given the other forms of relief available to the

Government to remedy Smith's CWA violations, the undersigned is not inclined to grant a form of relief

when no basis for same has been provided. Even

if

the Court had the authority it would decline to

require compensatory mitigation because the restoration and monetary penalties imposed adequately
address the

C.

violations. As

such, the Government's request for compensatory mitigation is

DENIED.

Civil Penalties
Before substantively addressing

civil penalties, the Government's

requested amount should be

viewed in context of how it has litigated this potential remedy. This case was filed in August of 2012.

filling of West Virginia

stream waters in conjunction with area surface coal mining operations. See also Butte
Envtl. Council v. United States Army CorptqlE4gi$, 620 F.3d 936, 947 (9'n Cir. 2010) (dealt with issuance of a
permit by the Corps); United States of America v. Feinstein Family P'p et al., Civil Action 98-873 (M.D. Fla. Oct.
30, 1998) (concerning the activities of a permit applicant, and referencing 40 C.F.R. $ 1508.20 to note that
mitigation "comes into play at the permitting stage of development, where it may be a condition imposed" by the
Corps or EPA); Ogeechee-Canoochee Riverkeeper. Inc. v. T.C. Lo
.,2010 WL 1009797 (S.D. Ga. 2010)
(where an "after the fact" permit was obtained from the Corps). The same holds true to the cases provided by the
Govemment as exhibits (Docs. 137-1 through 137-4) ((Staben Consent Decree concerned National Permit #32 and
required the party to obtain all necessary permits and submit to the EPA a permit status checklist), (Century
Homebuilders dealt with a permit to authorize discharges), (f.lewdunn Associates dealt with Nationwide Permit #32
and did not relieve defendants of the obligation to comply with any applicable permit requirements), and
(Chesapeake Appalachia dealt with Nationwide Permit #32 and did not relieve defendants of the obligation to
comply with any applicable permit requirements and required defendants to obtain all necessary permits and apply
for certain specific permits as part of the compliance protocol of the consent decree)).

l5 Including the Government's untimely presentation of information (hard facts and specific calculations)
concerning temporal loss to Smith namely, occurring on the eve of trial. While the Government contends that
Smith knew it would seek temporal losses because it sought such relief in the Complaint and other pre-trial filings
(Doc. 137 at 5 at note I (referencing specifically Doc. 122)), this is not tantamount to placing Smith on notice of a
specific request for temporal loss as a form of relief. The Government cannot claim compensatory mitigation is
injunctive relief and so no specific calculations or numbers as to Smith's potential temporal loss costs were required
to be produced to Smith, yet simultaneously hold Smith to some "understanding" that the Government was seeking
temporal loss with a specific price tag and as such had to "just accept" the numbers it presented for the first time at

-

trial.
Moreover, pointing to pre-litigqtion correspondence and documents given to Smith (Doc. 122 at2-3 and at
note 2), before any Complaint was filed, to somehow assert that Smith was "on notice" that temporal losses would
officially be sought against him in this case lacks merit. What parties demand and assert pre-trial is often distinct
to what is actually litigated and the forms of relief officially sought throughout the course of any case. As for the
Harris report the Government asserts it served on Smith in July 2013, which mentioned that Smith, in Harris'
opinion, has the financial capability to purchase mitigation credits, again, that has nothing to do with the official
relief the Government sought against Smith. For the Government to contend that based on that report Smith was
"undoubtedly on notice of the magnitude" of the Government's compensatory mitigation claim (including temporal
loss component) is a non-starter. The Harris report did not break down any temporal losses, but instead, provided
an overall amount as to what Smith could pay, in his opinion, for everything.

t4

Throughout this case, the Government failed to notify either Smith or this Court of the actual amount

of

civil penalties sought for the CWA violations. At most, the Government only (inadvertently) disclosed
and presented such evidence during discovery -- via the deposition testimony of EPA representative Mike

Wylie -- for a potential civil penalty range of $50,000-$150,000. (Doc. 1i0; Doc. ll0-2 at 3 (Dep.
Wiley at 149-150). However, the Government would not -- and did not even at trial -- commit to that
penalty

range. Additionally, in the Government's May 13,2014 jointly filed proposed pretrial

document

for the Phase II trial, the Government failed to speciff the total civil penalties sought (Doc. 107 at 5-7)
and instead, generally discussed civil penalties for CWA Section 404 violations and simply stated that per

statute

"[f]or violations occurring after January 30,

(Id. at

6).

1997, the maximum penalty

is $27,500 per day."

As such, on May 15, 2014, the Court ordered the Government to file a Supplement to the

proposed pretrial document specifuing the damages sought against Smith (and also, as discussed at the

Final Pretrial Conference to explain how it arrived at that

In its May 19,2014

figure). (Doc. 109 at 2).

Supplement, the Government stated that

it

sought to recover $300,000

as

civil penalties (Doc. I 13 at 2) with the contingency and caveat that the Court also ordeq infull, all of the
injunctive and compensatory mitigation relief requested; otherwise, the Government stated that it would
seek an even higher

penalty. In so doing, the Government provided no information

as

to how they

calculated the $300,000 total, much less any discussion of the requisite CWA penalty factors used in the

Eleventh Circuit to arrive at a penalty amount. (Doc.

113).

Instead, two (2) weeks before trial was the

first time either the Court or Smith were notified of any civil penalty total which would be sought by the
Govemment. Nevertheless, even then, still, neither the Court nor Smith had been provided any
explanation as to how the Government arrived at that amount. This Court was then, and remained
through the start of Phase

II trial on June 2,2014, wholly unable to discern

was proper and/or how it related to any of the facts of this

whether the $300,000 figure

case. Further complicating

both the Court and

Smith's understanding of the civil penalties sought, is that on the first day of the Phase II trial on June 2,
2014, the Government asserted

- for the first time and without
l5

explanation or evidence as to how that

number was calculated
demanded

-

that

it seeks $1,500,000

as the civil penalty, a figure five (5) times that

just a few weeks earlier. With the aforementioned context in mind, the Court turns to

substantively addressing the matter of civil penalties.

To protect the integrity of the Nation's waters, Congress authorizes courts to, upon finding a
violation of the CWA, assess appropriate civil penalties under Section 309(d) to restore and maintain the
o'chemical, physical,
and biological integrity of the Nation's

waters."

33 U.S.C. $

1251(a). 33 U.S.C.

$

13l9(b), (d) (providing for civil penalties); Atlantic States Legal Foundation Inc. v. Universal Tool &
Stamping Co. Inc. ,786 F. Supp. 743, 746 (N.D. Ind. 1992) (providing that a district court is authorized to
assess appropriate

civil penalties). However: "[t]he Court can conceive of no mathematical formula

which can be applied to the overall effort of assessing a fair penalty. Each case must be decided on its
own facts. While the experts offered calculations on the ability to pay as well as the economic benefit, to
these findings there must be applied a degree of reason and common sense without the benefit of precise

mathematical equations...To achieve the goal of deterrence, a penalty must be high enough so that the
discharger cannot o'write it off ' as an acceptable environmental trade-off for doing business. . .

[it] must be

high enough to insure that [violators]...cannot simply absorb the penalty as a cost of doing business."
united States v. Gulf Park water Co.. Inc. , 14F. Supp. 2d 854, 868-869 (s.D. Miss. 1998).
Section 309(d) mandates a civil penalty for each violation, instructing that any person found in

violation of the Act "shall be subject to a civil penalty not to exceed $25,000 per day. 33 U.S.C.

l3l9(d).

$

Over the years, this amount has been amended and supplemented by the Code of Federal

Regulations as follows: January 30,1997 - March 15,2004, the penalty is $27,500 per day per violation,

March 15, 2004 - January 12, 2009, the penalty is $32,500 per day per violation; January 12, 2009 December 6,2013, and effective after December 6,2013, the penalty is $37,500 per day per violation.
40 C.F.R. $ 19.4 (Eff. Dec.

6,2013).

the maximum daily amount "for each

Congress has also specified that penalties be assessed considering

violation." Atlantic

States Legal Foundation. Inc. v. Tyson Foods.

Inc., 897 F.2d I 128, ll39 (l lth Cir. 1990). In calculating the appropriate civil penalty, the Eleventh

I6

Circuit has adopted a "top down" approach: the court must first determine the maximum fine for each
daily violation for which a defendant is liable, but thereafter can can use the CWA's enumerated factors
to uphold or mitigate the maximum. 33

u.s.c. $ 1319(d);

Tyson Foods ,897 F.2d at

ll4l.

To arrive at the maximum starting figure, there must be a beginning and end date to the "violation

time clock."r6 In this case, there is no clear indication as to the actual day that the unpermitted work

began.rt Given that the statute instructs that civil penalties
provided no facts in Phase

II of the trial

as

be assessed per day and the Government has

to the start date, the Court has selected January I't of each

relevant year as the "start date" from which to calculate the maximum per day

penalty. Similarly,

as the

Government has not provided any facts as to when the clock for Smith's civil penalties stopped, the Court
has found persuasive caselaw concerning ongoing impediment violations.18 From this, the Court finds

16 The start date for assessing penalties has traditionally been the date that violations of the CWA began.
See, e.g., Ogeechee-Canoochee Riverkeeper.Inc. v. T.C. Logging. Inc.,2010WL 1009797 (S.D. Ga. Mar. 18,2010)
(starting the penalty clock as of the day the unpermitted road construction began); Center for Biological Diversity v.
Marina Point Dev. Assocs., 434 F. Supp. 2d 789 (C.D. CaL 2006) (starting the penalty clock as of the day that
unpermitted work began); United States v. Gulf Park Water Co.. Inc., 14 F. Supp. 2d854 (S.D. Miss. 1998) (starting
the penalty clock as ofthe day the chancery court issued a cease ofthe illegal discharge and discharge continued).
17 The Complaint indicates work on the dams/roads and subsequent discharge began on or around 1998.
The summary judgment offers a little more precision on the year but no specific date: stating work began
on Dams A, B, and D in 2003 or 2004, and work began on Dam E in2004 or 2005. (Docs. 51, 106).
(Doc.

1).

18 See 99., T.C. Loeging" 2010 WL 1009797, *l (dealing with a road constructed in violation of the Act
that was in place at the time of the remedies hearing); United States v. Donovan , 466 F . Supp. 2d 595, 597 (D. Del.
2006) (dealing with a landowner whose unpermitted fill of wetlands was in place at the time the remedies hearing
was held). Additionally, while concerned with unpermitted discharge of water from an industrial plant, Siena Club,
Lone Star Chapter v. Cedar Point Oil Co.. Inc., 73 F.3d 546 (5th Cir. 1996) sheds light on a date that can be used to
stop the civil penalty clock. In Cedar Point, the parties stipulated at trial that there were 797 days of unpermitted
discharge. ld. at 573. The district court entered its judgment 12 days later; the unpermitted violations of the Act
were presumed ongoing from time the parties stipulated 797 days to the time the court announced its judgment. Id.
The circuit court noted that the district court added the 12 days to the maximum civil penalty multiplier, which
brought the total multiplier to 809 days.
The circuit court agreed with the district courts calculation of the
maximum penalty based on 809 total days.
However, United States v. Donovan illustrates the common
uncertainty in calculating the maximum civil penalties when the parties do not stipulate to an end date for CWA
violations. In Donovan. the Govemment filed a complaint against the defendant for unpermitted fill in a protected
wetland and sought injunctive relief in 1996. Donovan, 466 F. Supp. 2d at 597. It was contended that the
defendant began filling protected wetlands in violation of the CWA in February 1993.
In 2006, the court
granted the Government's request for summary judgment and assessed civil penalties in the amount of $256,000.
Id. at 600. The court opined that the maximum civil penalty under 1319(d) ranged from $1 I to $15 million. Id.
The court did not elaborate on the end date used to derive this figure. It can be infened that the civil penalty clock
had to stop on the date the summary judgment and civil penalty were jointly announced.

Id.

Id.

Id.

t7

that the harm from Dams A, B, D, and E were ongoing through Phase
the clock on the final day ofthe Phase

II trial -

II's conclusion

June 3,2014 -- because Phase

II

and

will thus stop

concludes or decides all

of the issues raised in the Govemment's Complaint.

As noted supra,in calculating the appropriate CWA civil penalty, this Court is required to start

with the maximum. Based on the foregoing, Smith is subject to a maximum CWA penalty in the
amount

of

for

$561,662,500

16,323 days

of violations.re

maximum potential CWA penalty is merely a starting
approach

- to either

assessing the propriety

Cir.

1996); Public Interest Research Group of New Jersey. Jnc.

913 F.2d,64, 80 (3'd

the

conducts a top-down

of the maximum CWA

maintain or deviate from the maximum. 33 U.S.C. g

897 F.zd at 1440-1441; Sierra Club. Lone Star ChaplglrJQcdarPoint
15tr'

in the Eleventh Circuit,

point. From this, the Court

in light of the six (6) Section 1319(d) factors,

penalty available

However,

13

t9(d); Tyson Foods,

Oil Co.. Inc.,73 F.3d 546,574-576

v. powell Duffryn Terminals. Inc.,

Cir. 1990); Universal Tool ,786 F. Supp. at 746-747 .

Specifically, because Congress set a particularly high maximum for civil penalties to reinforce the
deterrent and punitive nature

of the CWA, after calculating the maximum, courts may, and often

do,

adjust significantly downward based on mitigating factors listed in the statute. Cedar Point,73 F.3d at
573; Tyson Foods,897 F.zd

at 1142.

These factors consist

of:

1) the seriousness of the violation or

violations; 2) the economic benefit (if any) resulting from the violation; 3) any history of such violations;

4) any good-faith efforts to comply with the applicable requirements; 5) the economic impact of
penalty on the violator; and 6) such other maffers
Foods, 897 F.2d at
imposing

as

the

justice may require. 33 U.S.C. g l3l9(d); Tyson

1140. Courts may also consider any other factors they determine are important to

afair penalty.

Tvson Foods,897 F.2d at

ll4l.

discretion in assessing the civil penalty under the six (6)

A

courtos decision is given a great deal

factors. Tull v. United

States

,

of

481 lJ.S. 412,

19 This total is based on days calculated from the representations in summary judgment that work began
on Dams A, B and D in 2003 or 2004 and on Dam E in 2004 or 2005 (Docs. 5 l, 106), with January l't of each year.
Additionally, this total includes the changing amounts of the per day per violation penalties, per the Code of Federal
Regulations amendments and supplements for the applicable time periods.

l8

427 (1987). However, each factor should be discussed as to what,
penalty assessed. Tyson Foods,897 F.2d al

1.

ll4l.

if

any, effect

it

has on the final

In so doing, the Court finds as follows.

Seriousness of Violations

The seriousness of the violation deals with the negative impact a defendant's actions have on the

environment. United States v. Smithfield Foods. Inc.,972 F. Supp. 338, 344-346 (E.D. Va. 1997)
(considering the negative impact that the defendant's chlorine and cyanide discharge had on native

species). This can range from toxic waste to organic material being discharged without a permit into
protected wetlands.

Id.

See also 9.g., Weber

v. Trinity Meadows Raceway. Inc., 1996 WL 477049,

x16 (N.D. Tex. Jun. 20, 1996) (evaluating whether the defendant's unpermitted discharge of pollutants

which were "largely,

if

not, wholly comprised of organic material" mitigated the civil penalty). The

seriousness of the violations is determined after both parties offer evidence in the form

of facts or expert

testimony. Smithfield, 972 F. Supp. at 343-349; Gulf Park Water, 14 F. Supp. 2d at 859-862. The
seriousness can be mitigated

immediate

if

the environmental impact of the unpermitted action only affects the

area. T.C. Logging,2010 WL

1009797,

*4.

Additionally, factors to consider include the

number and frequency of violations, how far the violator's discharges exceed the permit parameters, the
presence, delay, or absence of state enforcement, the toxicity of the discharged substance, and violations

of reporting requirements. Smithfield, 972F. Supp. at 343; Allegheny Ludlum, 187 F. Supp. 2d at 426;
Hawaii's Thousand Friends v. City

&

Countv of Honolulu, 821 F. Supp. 1368, l3S3 (D. Haw. 1993)

(looking to the number of violations, the duration of noncompliance, the significance of the violation, and
the actual or potential harm to human health and the environment).

The Government contends that the seriousness of the violation is high and supports a substantial

penalty. In support, Dr. Kruczynski testified that water testing indicates a rise in temperature in
streams surrounding the impoundments, which affect water
seriousness of the destruction of wetlands in

conducted any water quality

quality. Dr. Kruczynski

the

also emphasized the

general. There was no evidence presented at trial that EPA

testing. In contrast, Smith hired Dr. Vittor to
t9

evaluate the water quality

over a period of four (4) years to determine any detrimental efflects of the crossings. This testing was
commenced at the request

of the EPA and was paid for by Smith at a cost of $35,000. Dr. Vittor

responded that while the water temperature has risen, there has been no material effect on the water

quality.

Dr. Vittor also noted a reduction in suspended solids which improves water quality.

The Court is more inclined to rely on the expert who actually conducted the testing for his
opinion regarding the detrimental effects of the violation on the water quality at this
Court finds that the violations have not resulted in significant effects on water

have been significant areas

time.

quality.

Thus, the

However, there

of wetlands that have been destroyed through Smith's building of

roads/dams and from the impoundments that

the

resulted. The Court credits Dr. Kruczrynski's testimony in

this regard and finds that the cumulative effect of this destruction is significant to the environment.

The primary purpose to be served in the imposition of a civil fine is to deter any future
destruction of wetlands. Still, there has been no evidence of harm (or even potential harm) to human

life, nor any specific evidence of harm to animal or aquatic

life.

The violations in this case are not toxic

dumping, but rather timber roads built by an individual who appears to care about his property and its
natural resources. With modifications the timber roads, which form the bases for the majority of the
violations, become CWA

exempt.

Thus, this factor does not support the severity of a maximum fine and

instead supports a significant decrease.

2.

Economic Benefit

The second factor to be considered is the economic benefit that a defendant receives from his
unpermitted actions. 33 U.S.C.
successfully deter

$ 1319(d). This factor "is of key importance if the penalties

violations." Tyson Foods. 897

F.2d at

ll4l.

o'A

are to

court need only make a 'reasonable

approximation' of the economic benefit [reaped from the defendant's noncompliance] when calculating a
penalty under the

[CWA]."

Cedar Point,73 F.3d at

576.

See also

470; Alleghey Ludlum, 187 F. Supp. 2d at 437; Gulf Park Water Co.,

gg., Piney Run, 82 F. Supp. 2d at

l4 F. Supp. 2d at 863. The goal of

the economic benefit analysis is to prevent a violator from profiting from its

20

wrongdoing. Piney Run,

82

F. Supp.2d at47I.

Initially, it was the theory of the Government that Smith built these roads to support his hunting
lodge enterprise. However, the Government put forth no evidence of any economic benefit that has been

derived from the Dennis Wing Lake Club, a quail hunting operation. In the liability phase of the trial,
Smith credibly testified that the Club was basically a break-even proposition. There was some evidence

that the crossings had resulted in some timber cutting income, but this was relatively minor and

intermittent. Moreover, any economic benefit from timber cutting should likely be exempt from
consideration since the CWA itself exempts what would otherwise be violations

if the crossings were

built within guidelines for forestry purposes. Thus, there is insufficient evidence of economic benefit to
Smith for his CWA

3.

violations. As such, this factor does not support

a severe

civil penalty.

Violations History

The third factor to consider is the defendant's history of violations. 33 U.S.C. $ l3l9(d);
Smithfield Foods, 191 F.3d at 531; Allegheny Ludlum, 187 F. Supp.2d

at433.

The absence of any past

state or federal environmental law or regulation violations can help mitigate the maximum
assessed under

helped

justi$

$ l3l9(d). T.C. Logging,2010 WL

a reduction in the

1009797,

civil penalty

*4 (reasoning that the lack of history

civil penalty paid). A defendant's

repeated violations or an ongoing

history of a particular violation that spans a significant duration can justiff upholding a higher penalty.

Gulf Park Water, 14 F. Supp. 2d at 864 (reasoning that the defendant was not entitled mitigation under
this factor because violations were ongoing for twelve years and there were repeated attempts to bring
him into compliance); Smithfield, 972 F . Supp. at 349 (stating that the six years of ongoing violations was
a significant duration taken into consideration with prior violations). Whether a defendant has committed

similar violations in the past is not the only part of the court's analysis, as the duration of a defendant's
current violations are also considered. Smithfield Foods,972 F. Supp. at

349. For

example, where

"defendant's violations occurred daily and uninterrupted for over twelve (12) years," one court found that

21

"the discharge is serious solely by virtue of its

duration." Gulf Park Water,

14 F. Supp. 2d at 859.

There is no past history of violations by Smith, thus, that part of this factor does not support a
severe

civil penalty but instead, supports a significant

decrease from the

current violations are lengthy in duration and continue to the present day
representations, approximately 12 years. However, Smith contends that

Government required he "do

will sufficiently

maximum. Even so, Smith's

-

based on the Government's

for five (5) of those years, the

nothing." On balance, this factor weighs in favor of a penalty amount that

deter individuals (including Smith) from violating the CWA in the

future.

However,

this factor certainly does not justi$ the absurd amount of over $500,000,000.

4.

Good Faith Compliance Efforts

The fourth factor to be considered is the good-faith efforts of the defendant to comply with the
requirements of the

Act.

33 U.S.C. $

l3l9(d).

This can be summed up as analyzing the defendant's

interaction with regulatory agencies before a civil complaint is filed. Qf, T.C. Loegine, 2010 WL
1009797,

*4, with United States v. Key West Towers. Inc.,720 F. Supp. 963 (S.D. Fla.

1989).20

Additionally, courts look to whether a defendant took any actions to decrease the number of violations or
made efforts to mitigate the impact of their violations on the environment. Smithfield , 972 F. Supp. at

347-349. Evidence of good faith efforts may include proof of insufficient or inadequate efforts to
comply, conducting environmental compliance audits, hiring consultants, or similar endeavors to obey
permitting requirements. Id.; Gulf Park, 14 F. Supp. 2d at 864-866.
The "good faith" factor was the subject of great controversy between the Government and Smith,

and also involves the matter of credibility. The Government contends that this factor supports a

20 In T.C. Logging, the defendant worked with the Corps to obtain an after-the-fact permit, which would
evaluate the harm of the unpermitted road and prescribe the necessary action to bring it into compliance. Id. at * I .
The district court found that the defendant's engagement with the Corp satisfied the good-faith factor. ld. at *4.
T.C. Logging can be contrasted with Key West Towers. In Key West Towers, the court found it "especially
bothersome" that the defendant continued to place unpermitted fill in a protected wetland after receiving a cease and
desist order from the Corps. 720 F. Supp. at 966. The court noted that the defendant's after-the-fact permit
application was deactivated because of inaccuracies.
The court held that these two factors, along with a
finding of liability from the jury, weighed in favor of imposing a $250,000 civil penalty. Id.

Id.

22

significant civil penaltv -- primarily based on the fact that it has taken l2 years to resolve this dispute and

it has been

8 years since the EPA issued its citation.

Mike Wylie, the EPA's representative, seemed to find unbelievable that Smith would not agree to

the EPA's determination that his roads were not exempt. Wylie also appeared to find equally
incredulous the fact that Smith litigated the matter, rather than just accepting the EPA's interpretation.

Wylie charactefized Smith's difference of opinion on the law (including whether exemptions applied)

as a

failure to cooperate. Wylie also seemed to suggest that it was an insult to the EPA's authority that Smith
attempted to recti$ the objection to dam/road D (by installing a culvert) without first obtaining EPA's
stamp of approval and that it should weigh against Smith as to culpability.

In contrast, Smith, through the testimony of Dr. Vittor, contends that he was cooperative with the
EPA and attempted in good faith to comply with the applicable regulations. As evidence of Smith's
good faith, Dr. Vittor points to the fact that at the EPA's request, Smith hired an expert to test the water

quali$ over a four (4) year period at a cost to Smith of $35,000, and hired a geotechnical engineer to
evaluate the crossings at a further cost to Smith of

$55,000. Dr. Vittor also testified that Smith paid him

to attempt to discuss and reach an agreement with the EPA. Moreover, the record is replete with
references

to amicable site visits by the EPA, Corps of

Engineers, and DOJ attorneys and staff.

The Court does not find that Smith's dealings with the EPA support a severe civil penalty.
Rather, considering the evidence and the

jury's findings, Smith was partially vindicated in his resistance

to the EPA's determinations. Accordingly, the Court finds that Smith's belief that he was in compliance
was not only reasonable, but partially

conect.

Piney Run, 82 F. Supp.2d at 471 (finding good faith

efforts at compliance when defendant did not consider the discharges to be permit violations and the court

found that the interpretation was not unreasonable). Further, Smith has spent a significant amount of
money at the request of the EPA for

testing. This does not indicate a person who simply ignored EPA

over a 12year period and made no efforts to comply with CWA requirements.

23

5.

Economic ImpgElqlPenalty on the Violator (Undue Burden)

The fifth factor is the economic impact that a civil penalty would have on the defendant violator

(r.e., Smith's financial stability). 33 U.S.C.

$

1319(d); Universal Tool,786 F. Supp. at 753-754.

Hearing testimony from a certified public accountant, a representative of the defendant corporation, or a
special master's report generally assesses the economic impact a

civil penalty will have on defendant.

Gulf Park Water,14F. Supp.2d at 866-868 (hearing experttestimony and reviewing a special master's
report);2r United States

v. Avatar Holdings- Inc.,1996 WL 47953| *11 (M.D. Fla. Aug. 20, 1996)

(hearing testimony from a representative of the defendant corporation). But

if

a defendant seeks to use

the economic impact of a civil penalty to mitigate the total amount, he has the burden of showing that the

penalty would be ruinous
Additionally,

if

or

otherwise disabling. Gulf Park Water, 14

F. Supp. 2d at

868.

a court is convinced that the imposition of the maximum penalty would have a more

drastic effect on a defendant than is needed to ensure future compliance, the court may take that into

account. Weber, 1996WL 477049,*17.
The Government has proposed that Smith should be required to pay $1.5 million for restoration,

fines, temporal loss and mitigation. This would amount to 79o/o of his and his wife's liquid assets.

(Plfs

Phase

II Trial Ex. 230). And although Smith is 63 years old, retired, depends on the vulnerability

of the market for income, and neither he nor his wife have significant earned income, the Government
contends that the "remainder"

will

be "adequate" for his needs for the rest of his and his

wife's lives. It

is the undersigned's opinion that the Government's request lacks objective perspective on the seriousness

of this particular violation. To suggest that the Court penalize Smith to this extent merits no further

2l After hearing evidence from experts, at least one court has allowed the personal and corporate assets of
the defendant that are illiquid to be used in calculating a defendant's ability to pay a civil penalty. Gulf Park
Water, 14 F. Supp. 2d at 866-68. In Gulf Park Water, the district court adopted Govemment's expert opinion that
evaluated the "assets, less liabilities, which could be liquidated or sold to gain revenue for a penalty payment." Id.
at 866. The assets considered included personally owned stock, art, and guns ofone defendant and the operating
and non-operating assets of another defendant, which was a corporation. Id. The court ordered a civil penalty
totaling

$I

,500,000 based on the expert's opinion of the after tax value of the assets after liquidation.

24

discussion.

6.

Other matters as justice may require

The final factor allows the court to address such other matters as justice requires, or essentially
any other facts deemed

relevant. Smithfield Foods,972F.

Supp. at

353.

This factor has been used as

a

tool to determine whether the civil penalty was equitable in relation to other analogous cases. United
States v.

Righter,20l0 WL 4977046, *4 (M.D. Pa. Dec. 2,2010) (performing a side-by-side comparison

of two prior

cases

to fashion an equitable penalty). Additionally, a defendant may be "entitled to some

credit for their lack of bad

faith."

Alleeheny Ludlum, 187 F. Supp. 2d at 445.

Smith has been (partially) found by a jury to be a CWA Section 404

violator.

Smith flooded

wetlands on his property and created significant impoundments. This is not a case of toxic dumping,

pollution, or egregious or irreversible harm to the environment (in the sense that restoration is available).
Rather, this is a case of a retired banker from a small town in South Alabama who decided to -- albeit

very unwisely -- build roads/dams on family property for the family's forestry business. Smith believed
that the roads were forest roads and so were exempt from the CWA's Section 404 permit requirements.

While he was ultimately wrong, in part, to some extent the jury also agreed with him.
Moreover, the fact that Smith disputed the EPA's findings is certainly not held against him.
While the Government has repeatedly expressed its surprise and shock at having to initiate this litigation
(they asserted at trial that the Section 404 permit violations cases settle about

99%o

of the time such that

this was abnormal), that does not detract from a United States citizen's right to dispute the Government's

findings and defend the claims against

him.

In sum, Smith is entitled to some credit for his lack of bad

faith (the absence of "evil motive"), and because the environmental harm which resulted from his
violations can, and will, be remedied and restoration will occur on his property.
Further, the Court has considered the expense

plan. The demolition

cost

to Smith to implement the requisite

restoration

will entail the extraction and movement of a significant amount of fill

material. Additionally, Smith will

bear further restoration costs for the destruction

25

of Impoundment

E

(the lake), planting trees throughout his properly, and taking all of the other detailed restoration steps
required by the forthcoming temporary restorative injunction (amended restoration plan). Also, Smith

will

be required to pay the fees of the Court appointed consultant.

7.

EPA Section 404 Settlement Penalty Policy Considerations

It is the EPA's policy to accomplish certain objectives in the assessment of penalties for
404 permit violations:

l)

Section

penalties should be large enough to deter noncompliance, both by the violator

and others similarly situated; 2) penalties should help ensure a level playing field by making certain that

violators do not obtain an economic advantage over others who have complied in a timely fashion; 3)
penalties should generally be consistent across the country to promote fair and equitable treatment of the

regulated community; and 4) settlement penalties should be based on a fair and logical calculation
methodology to promote expeditious resolution EPA Revised Clean Water Act Section 404 Settlement
Penalty Policy at 4 (Dec. 21,2001), http://water.epa.gov/rype/wetlands/outreach/factl5.cfm (last visited

July 17, 2014). Courts may balance any penalty against the violator's ability to survive after it imposes
a fine, considering a defendant's total assess and liabilities,

etc.

Smithfield Foods,972 F. Supp. at 353;

GulfPark, 14 F. Supp.2d at 866-868.
To assist with the calculation of civil penalties in this case, the Court has referred to the EPA's
settlement polic;, and penalty assessment process> including the testimony of EPA representative Mike

Wylie about same. While the Court understands that the EPA policy is used for settlement purposes,
given the sparse case law, it proves as a useful guide- The EPA policy provides that the "bottom line
penalty" amount (the minimum penalty the government will accept) is comprised of economic benefit

plus

a

preliminary gravity amount (plus or minus gravity adjustment factors) minus litigation

considerations, minus ability to pay, minus mitigation credits via the following formula:

Penatiy: Economic Benefit + (Preliminary Gravity Amount +/- Gravity Adjustment
Factors) - Litigation Considerations - Ability to Pay - Mitigation Credit for SEPs
Preliminary Gravity Amount: (sum of A factors + sum of B factors) x M

26

M

is the Multiplier

:

$500 for minor violations with low overall environmental and compliance
significance, $1,500 for violations with moderate overall environmental and compliance
significance, and $3,000-$10,000 for major violations with a high degree of either environmental
or compliance significance.

As to economic benefit, the Government presented no relevant economic benefit evidence,

as

such, the Court finds that this factor is zero (0).22

Regarding gravity, at trial the Court questioned EPA representative Mike Wylie as

factors (which are based on a scale

of l-20, with 1 as the lowest

to

these

and 20 as the highest), and has

considered, in part, his testimony concerning the values he would ascribe but acknowledges areas

of

disagreement, to find as follows:

"A"

Factors: Environmental Significance
Harm to Human Health or Welfare:
Extent of Aquatic Environment Impacted:
Severity of Impacts to Aquatic Environment:

Uniqueness/Sensitivity of Affected Resource
Secondary/Off- site impacts :
Duration of Violation:

I (low per Wylie)

:

l0 (but per Wylie it is l5)
l0
I (low per Wylie)
5 (but per Wylie

it is 1l-13)23

1024

T

"8" Factors: Compliance Siqnificance
Degree of Culpability:
Compliance History of Violator:
Need for Deterrence:

5 (but per Wylie it is l0- I 5)25
0 (none per Wylie)
10

22 lndeed, the only evidence presented during hial was that of timber sales on the site. (Gov't Phase II Tr.
Ex. 44). However, Smith contends that the dams/roads were "forest roads" such that they were constructed for his
timber business. Additionally, while Smith also operates a quail hunting club on the site (Dennis Wing Lake
Club), the Government failed to present any evidence of his sales or profit from that business.

23 There was no evidence to support the higher rating as the only evidence presented was that of

some

elevated water temperatures.

24 The Government contends that Smith's violations have been occurring for

12 years.

25 The Court disagrees with the Government's description of Smith's culpability and its characterizations
behavior and interactions with the Government. Additionally, the Court is not persuaded by the
Govemment's contention that the mere fact of Smith disputing the Govemment's findings and disagreeing with
same, and as a result taking this matter to court, somehow translates into grounds for a high culpability score,
because the Government had to expend resources and money to litigate this case. Under the law, Smith was
entitled to dispute and disagree with the Govemment's findings and litigate this matter; thus, Smith's exercise of his

of his

legal rights should not be equated as "culpability" or "avoidance" or any other negative behavior.

27

Gravity:

52

Additionally, the Court finds that Smith's violations are

of

"moderate overall environmental and

compliance significance" such that the applicable Multiplier (M) is $1,500. As such, the Preliminary

Gravity Amount is 52 x $1,500: $78,000. The Penalty is calculated as follows:
Penalty

:

Economic Benefit
+ Preliminary Gravity Amount
-

0

Adjustments/reductions26

$78,000
0

$78,000

8.

Conclusions as to Civil Penalty

As stated supra, Smith is subject to a maximum CWA penalty in the amount of $561,6 62,500 for
16,323 days of

violations. Additionally, in this Court's opinion,

under the EPA Section 404 Settlement

Policy, Smith would be subject to a $78,000 penalty if he settled. This presents a wildly varying range.
The Court's research reveals a dearth of cases dealing with dam and impoundment situations
matching that

here. As such, the Court

an unpermittedz7 road or wetland

has reviewed a handful of persuasive cases that have dealt with

filling, and what they have held to be appropriate civil penalties:

'

T.C. Logging,20l0 WL 1009797, *5 (assessing a $78,000 penalty for one road);

'

Donovan , 466

'

F

. Supp. 2d at 599 (assessing a $256,000 penalty for .77 | acres of illegal

fill);

Weisman, 489 F. Supp. at 1350 (assessing a $10,000 penalty for one road along with
complete restoration);

U.S. E.P.A. v. Northwoods Organics.Inc., Dkt. No. 5{WA-95-005, (U.S. E.P.A. Region 5,
Mar.24,1995), the EPA assessed a $63,000 consent penalty against a peat mining business
as part of a settlement of an enforcement action directed to stopping the opening of sites on
1,300 acres of wetlands for peat mining without a $ 404 permit.

United States v. Feinstein Family Partnership. Case No.96--232 (M.D.Fla.1998), the Court
assessed a $400,000 penalty for clearing 24Yz aqes of wetlands for development of a
residential subdivision without a $ 404 permit. The proofs showed that the "twenty-four acres
of wetlands were previously heavily vegetated" and afterwards "the terrain was flat and water
pooled up on the site" ... and that "the damage done to the wetlands was significant."

26 Upon review, the Court finds that none are merited in this case.
27 Unpermitted at some point but not necessarily never permitted (e.g,"after the fact" permits, etc)

28

'

Borden Ranch Partnership v. Corps of Engineers" 1999 WL 1797329 (E.D. Cat. Nov. 8,
1999), the plaintiff deep ripped and plowed wetlands which degraded and destroyed 2 acres
as part of a real estate development. The Court found a lack of earnest effort to comply with
the CWA. Plaintiff was fined $1,500,000 reduced to $500,000 if certain restoration measures
were undertaken.

'

United States v. Cundifl 555 F.3d 200, 204 16'h Cir. 2009) (assessing a $250,000 civil
penaltl' for illegally draining and filling wetlands but suspending all but $25,000 if restoration
plan was followed).

Taking into consideration the case law, evidence, parties'arguments, all of the Section l3l9(d)
factors, the maximum penalqr, the EPA settlement policy penalty, and other factors deemed relevant by
this Court, the Court imposes a CWA civil penalty against Smith of $78,000.

III.

Conclusion
Upon consideration,

part and GRANTED in part

l)

it is ORDERED that the Government's

request

for relief is DENIED in

as detailed supra suchthat;

the Government's request for entry of a permanent injunction against Smith is DENIED;

2) the Government's request for a temporary restorative injunction (the amended restoration plan
for the site) against Smith is GRANTED in part asdescribed in Attachment A;
3) the Government's request for compensatory mitigation is DENIED;

4) the Government's request for a $1,500,000 civil penalty is DENIED as to the amount and
GRANTED as to a form of relief, Smith is ORDERED to pay, on or before January 1,2015,
a CWA civil penalty of $78,000; and
5) Smith is ORDERED to pay, in annual installments, the cost of the Court's consultant, who
will be appointed to monitor compliance with the amended restoration plan (as described in
Attachment A).

6) It is further ORDERED

that pursuant to Rule 53(aXlXC) of the Federal Rules of Civil
a consultant to monitor compliance with the dmporary
restorative injunction (the restoration plan - Attachment A). The parties shall file, on or before
Procedure,2s the Court shall appoint

28 (a) Appointment. (1) Scope. Unless a statute provides otherwise, a couft may appoint a master only
to... (C) address pretrial and posttrial matters that cannot be effectively ... addressed by an available districtjudge
or magistrate judge of the

district.

The undersigned is not an expen in complex environmental restoration matters.

An experienced consultant who is lvill be better suited to effectively monitor compliance rvith the requirements of
the temporary restorative injunction issued in this case.

29

August 8,2014, a Notice of Suggested Candidates for Appointment,2e identifying the proposed
consultant(s) and their credentials, as well as noting whether they are in joint agreement as to any
proposed consultant(s).

DONE and ORDERED this the24th dav of Julv 2014.
/s/ Kristi K. DuBose

KRISTI K. DUBOSE
UNITED STATES DISTRICT JUDGE

29 Fen. R.CIV. P. 53(b)(l): "Any party may suggest candidates for appointment." This shall provide the
parties with an opportunity to make written submissions to the Court.
30