Klockenkemper et al v. United States Environmental Protection Agency

Filing 72

ORDER OF REMAND: Case remanded to Environmental Appeal Board. Petitioners' motion for judicial notice 55 is denied as moot. Signed by Chief Judge David R. Herndon on 3/21/2012. (msdi)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS

ESTATE OF EDWARD J.
KLOCKENKEMPER
and
ROCKY WELL SERVICE, INC.,
Petitioners,
v.
U.S. ENVIRONMENTAL PROTECTION
AGENCY,
Respondent.

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3:10-cv-325-DRH-PMF

ORDER
HERNDON, Chief Judge:
This case is here

on appeal following

respondent

United States

Environmental Protection Agency’s (“EPA”) determination that petitioners Rocky
Well Service, Inc. and the Estate of Edward J. Klockenkemper violated the federal
Safe Drinking Water Act (“SDWA”). Petitioners sought to have the Environmental
Appeal Board’s (“Board”) March 30, 2010, order set aside or remanded, along
with several other orders entered during the administrative process. Instead of
responding on the merits of the appeal, respondent moves this Court to vacate
and remand the Board’s final decision dated March 30, 2010, because the EPA
erred in citing to unapproved Illinois Underground Injection Control (“UIC”)
regulations in its amended complaint, in addition to the federally approved
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Illinois UIC regulations. Petitioners oppose respondent’s motion and move this
Court to take judicial notice of certain relevant portions of the SDWA, and
promulgated federal and state SDWA regulations.

For the following reasons,

respondent’s motion is granted, and petitioners’ motion is denied. The Board’s
final order is vacated and the case is remanded to the Board for reconsideration
of the issues under the appropriate legal standards.
I.

PROCEDURAL BACKGROUND

In October 1995, the State of Illinois issued a series of notices of violation
(“NOV”) to petitioners, for alleged violations of the SDWA Class II Illinois UIC
regulations.

In March 1999, the State of Illinois referred the matter to the

respondent, and respondent issued a federal NOV in September 2000. In July
2001, respondent issued an initial administrative complaint to petitioners.

In

July 2008, the Regional Judicial Office for U.S. EPA Region 5 (“RJO”) issued an
initial order on penalty against the petitioners. Petitioners appealed through the
administrative process, and on March 30, 2010, the Board issued a final decision
upholding all orders by the RJO imposing penalties on petitioners for violations of
SDWA regulations, including a $105,590 penalty jointly imposed on petitioners.
(Doc. 2).

Petitioners appealed the Board’s decision and requested that the

agency’s decision be set aside or remanded for redetermination.1

1

Petitioners requested this Court to review the following orders by the RJO and
Board: “(1) 2/6/03 R. Kossek Order Granting Leave to Amend Complaint to Add
EJK; (2) 5/3/05 R. Kossek Order Denying Motion to Dismiss Complaint; (3)
5/17/06 M. Toney Order Striking Affirmative Defenses; (4) 12/27/06 M. Toney
Partial Accelerated Decision on Liability; (5) 10/2/07 M. Toney Order Denying EJK
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Prior to responding to the merits of petitioners’ appeal, on June 3, 2011,
respondent submitted a motion to vacate and remand the case to the Board
because the EPA committed an error in relying on unapproved State regulations
in their analysis.

(Doc. 50).

Respondent believes that these were procedural

errors that can be cured in further administrative proceedings.

Petitioners

responded on July 8, 2011, agreeing with respondent’s motion that an error of
law was made; however, they requested the court to vacate with prejudice and
deny the remand request due to irreparable harm and prejudice to petitioners.
(Doc. 51).

On July 22, 2010, respondent submitted a reply to petitioners’

response explaining that dismissal with prejudice would preclude the EPA from
correcting the pleading error and seeking clarity regarding the findings.

(Doc.

53). Further, respondent explained that there was sufficient evidence regarding
the already proven conduct of petitioners to provide a sufficient basis for a finding
of liability under the appropriate Illinois UIC regulations.

Motion to Conform Transcripts; (6) 7/12/07 M. Toney Order Regarding Motion for
Audio tapes; (7) 8/27/07 M. Toney Order Denying Motion for Audio tapes; (8)
11/29/07 M. Toney Order Altering Briefing Format at [eleventh] [h]our; (9) 7/23/08
M. Toney Initial Order on Penalty; (10) 12/21/08 EAB [Appeals Board] Order
Rejecting EJK 2 Part Brief on Appeal; (11) 3/30/10 EAB [Appeals Board] Final
Order Upholding EPA Region Initial Order.” (Doc. 2 at 3). Petitioners requested
that this Court set aside or remand the Board’s order, because “1) there is not
substantial legal basis or evidence on the record, taken as a whole, to support the
orders or the assessment of liability and the final penalty amount as to
[petitioners], 2) since the Administrator’s assessment of liability and penalty
constitutes an abuse of discretion, 3) since the orders fail to comply with other
requirements of 5 U.S.C. 706; and 4) since the Administrator’s interpretation and
application of the SDWA, as set forth in the orders, violated Respondents’ Due
Process rights.” (Doc. 2 at 2).
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On August 18, 2011, petitioners filed a motion for an order to give judicial
notice of certain relevant portions of federal SDWA regulations and of properly
promulgated federal and state SDWA regulations. (Doc. 55). This request was
made in relation to respondent’s motion for vacatur and remand. On September
16, 2011, respondent submitted a response explaining that judicial notice is not
appropriate because the parties disagree as to which version of the Illinois UIC
regulations is applicable with respect to the petitioners’ violations. (Doc. 56). For
the reasons that follow, respondent’s motion to vacate and remand to the Board is
granted, and petitioners’ motion for judicial notice is denied. The case is
remanded to the Board for reconsideration under the appropriate legal standards.
II.

ANALYSIS

The Court will first address whether the procedural error necessitates a
remand, followed by addressing petitioners’ irreparable harm, jurisdiction, and
judicial notice arguments.
A. Procedural Error
Respondent contends that in its amended complaint filed against
petitioners on February 20, 2003, the EPA inadvertently cited to unapproved UIC
regulations, along with federally approved UIC regulations, in describing
petitioners’ violations under the SDWA.2 Respondent posits that because of this

2

Respondent asserts that in analyzing the petitioners’ liability, “the RJO relied in
part on the Illinois Oil and Gas Act, 25 Ill. Comp. Stat 725, and regulations
promulgated thereto found at Ill. Admin. Code Title 62, §§ 240.760(e)(6) and (f),
and Ill. Admin. Code 62, § 240.780(e).” The Board’s decision to affirm the RJO’s
finding also relied in part on language in the Illinois Oil and Gas Act and Illinois
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procedural error by the EPA, this Court should remand the case back to the
Board for redetermination. The Court agrees.
This Court has the authority to remand this case back to the Board. Sec’y
of Labor of the U.S. v. Farino, 490 F.2d 885, 891 (1973) (“The Supreme Court
has indicated that the district courts have inherent power to remand
administrative matters to agencies.”).

In SEC v. Chenery Corp., the Supreme

Court explained the basic guidelines for judicial review of an administrative
action.

318 U.S. 80, 94 (1943).

The Court explained its deferential stance

towards administrative decision making with regards to factual findings and
discretionary determinations. Id.
In Immigration & Naturalization Servs. v. Ventura, the Court reiterated
the basic principle governing remand that “a court of appeals should remand a
case to an agency for decision of a matter that statutes place primarily in agency
hands.” 537 U.S. 12, 16 (2002). Additionally, if an agency makes an error of law
in its decision, a reviewing court should remand the case so the agency can take
steps to apply the correct law. NLRB v. Food Store Emps. Union, 417 U.S. 1, 9
(1974) ("It is a guiding principle of administrative law, long recognized by this
Court, that, an administrative determination in which is imbedded a legal
question open to judicial review does not impliedly foreclose the administrative
agency, after its error has been corrected, from enforcing the legislative policy
committed to its charge.'”) (quoting FCC v. Pottsville Broad. Co., 309 U. S. 134,

Administrative Code. However, the approved Illinois UIC program for Class II
wells, CFR § 147.701, does not refer to these provisions. (Doc. 50 at 4).
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145 (1940)); see also Cissell Mfg. Co. v. U.S. Dep’t. of Labor, 101 F.3d 1132,
1136 (6th Cir. 1996) (“It is well settled that when an agency makes an error of law
in its administrative proceedings, a reviewing court should remand the case to the
agency so that the agency may take further action consistent with the correct legal
standards.”).
Here, the procedural error necessitates a remand because the agency has
not yet had an opportunity to consider the issues of this case within the proper
framework. The EPA has the authority to adjudicate this matter, and the agency
has the right to reconsider the matter under the proper basis. Therefore, this
Court finds that the matter should be remanded to the Board for further
consideration.
B. Irreparable Prejudice
Despite petitioners’ arguments to the contrary, this Court does not find that
irreparable prejudice exists in this case. Petitioners argue that a remand would
be inappropriate because respondent would have to restart and retry the matter.
They believe that a vacatur with prejudice is warranted because the primary
defendant and witness is now deceased,3 and because petitioners have waited
fifteen years for a hearing on the merits of the case.

(Doc. 51 at 14-15).

In

response, respondent states that there is neither a need for further fact finding
nor new testimony in this case. (Doc. 53 at 2). Respondent believes that the

3

Edward J. Klockenkemper died on April 27, 2010. The Court granted
petitioners’ unopposed motion to substitute the Estate of Edward J.
Klockenkemper for and due to the death of Edward J. Klockenkemper, on
November 23, 2010. (Doc. 24).
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already proven conduct of petitioners will serve as the basis of liability. Thus,
respondent posits that no further fact finding or testimony should be necessary.
Nevertheless, respondent contends that if the Board determines that a new trial is
necessary, the EPA should have the right to retry this case.

Based upon

respondents’ contentions, the Court finds no irreparable harm to petitioners.
Consequently, this Court finds that the matter should be remanded to the Board
for further consideration.
C. Jurisdiction
Petitioners assert that jurisdiction does not exist in this case under the
SDWA for the orders under review, therefore the Court must vacate this decision
due to lack of jurisdiction.

(Doc. 51 at 2).

It is a fundamental rule of

administrative law that a reviewing court cannot substitute its own judgment for
that of the administrative agency. SEC v. Chenery, 332 U.S. 194, 196 (1947) (“[A]
reviewing court, in dealing with a determination or judgment which an
administrative agency alone is authorized to make, must judge the propriety of
such action solely by the grounds invoked by the agency. If those grounds are
inadequate or improper, the court is powerless to affirm the administrative action
by substituting what it considers to be a more adequate or proper basis. To do so
would propel the court into the domain which Congress has set aside exclusively
for the administrative agency.”).
Here, the Board should decide whether it has jurisdiction under SDWA to
take this action against petitioners. See Cissell Mfg. Co., 101 F.3d at 1136; S.
Prairie Constr. Co. v. Local No. 627, Int’l Union of Operating Eng’rs, 425 U.S.
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800, 806 (1976); Harlan Bell Coal Co. v. Lemar, 904 F.2d 1042, 1046 (6th Cir.
1990) (“Where the ALJ or BRB has erred by … reviewing evidence under an
incorrect legal standard, then we must remand the case for additional
proceedings.”); Faries v. Dir., Office of Workers’ Comp. Programs, 909 F.2d 170,
173 (6th Cir. 1990) (“Where the ALJ or BRB has erred by reviewing evidence
under an incorrect legal standard, remand of the case for additional proceedings
is normally appropriate.”). It is not within this Court’s authority to decide on
jurisdiction presently, since the Board has not had an opportunity to determine
this issue.
D. Judicial Notice
Petitioners move this Court to take judicial notice of “certain relevant
portions of federal Safe Drinking Water Act, Sec. 1425 (42 U.S.C. 300h-1), and of
properly promulgated federal and state SDWA regulations (and documents
comprising portions of same).”4 (Doc. 55 at 1). Given the Court’s decision to
remand the case back to the Board for reconsideration, petitioners’ motion for
judicial notice is denied as moot.

Furthermore, petitioners’ motion is denied

because the parties disagree about which version of the Illinois Underground
4

Petitioner specifically requests this Court to take judicial notice of the following:
federal statutes including 42 U.S.C. 300h-1(b)(3) and 42 U.S.C. 300h-1(b)(4);
federal regulations including 40 CFR 147.701(a), 40 CFR 147.701(a)(1), 40 CFR
147.701(b), 40 CFR 145.32(a), 40 CFR 145.32(b)(2), 40 CFR 145.32(b)(4), and
40 CFR 145.33; federal documents including Admin Record Dec. 89 – EPA
R00001; state statutes including West’s Smith Hurd Illinois Compiled Statutes
Table (1993) and 225 Illinois Combined Statutes Part 725; and state regulations
including Illinois Department of Mines and Minerals Regulations for the Oil and
Gas Division Rules (1984), 8 Illinois Register 2475 (1984), 14 Ill. Reg. 3053
(1990), 15 Ill. Reg. 15493 (1991), 19 Ill. Reg. 10981 (eff. July 14, 1995), and 62
Illinois Administrative Code Part 240.760 and 780.
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Injection Control regulations under the SDWA is federally enforceable with
regards to the petitioners’ violations.

See Hennessy v. Penril Datacomm

Networks, Inc., 69 F.3d 1344, 1354 (7th Cir. 1995) (“[I]ndisputability is a
prerequisite” before a fact to be judicially noticed.”); Ilhardt v. Sara Lee Corp.,
118 F.3d 1151, 1157 (7th Cir. 1997) (“If we are to take judicial notice of a fact,
however, that fact must be indisputable.”).
III.

CONCLUSION

For the reasons stated above, respondent’s motion is granted, and
petitioners’ motion is denied. The Board’s final order is vacated and this case
remanded to the Board for reconsideration under the appropriate legal standards.
IT IS SO ORDERED.
Signed this 21st day of March, 2012.

David R. Herndon
2012.03.21
16:13:31 -05'00'
Chief Judge
United States District Court

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