United States of America v. Whitehill et al

Filing 182

DECISION AND ORDER adopting Magistrate Judge H. Kenneth Schroeder, Jr.'s Report and Recommendation 166 . The Third Party Defendants' motion for judgment on the pleadings 157 is granted, and the third party complaint against the Third Pa rty Defendants is dismissed with prejudice. Pursuant to Rule 54(b) the Clerk shall not enter judgment at this time. Within two weeks of the date of this Decision and Order, the Defendants and the Third Party Defendants who moved to dismiss the thir d-party complaint shall notify the Court of whether (and, if so, why) it is appropriate to direct entry of final judgment for the Third Party Defendants who moved to dismiss the third-party complaint. This case is recommitted to Magistrate Judge Michael J. Roemer for further proceedings. SO ORDERED. Signed by Hon. Richard J. Arcara on 1/18/18. (LAS)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
___________________________________________
UNITED STATES OF AMERICA,
Plaintiff,
v.
DAVID A. WHITEHILL and DEPENDABLE
TOWING & RECOVERY, INC.

14-CV-188-RJA-MJR
DECISION AND ORDER

Defendants/Third Party Plaintiffs,
v.
ALLEGANY LANDSCAPE CONTRACTORS, INC.,
AMHERST PAVING, INC.,
BIRCH GROVE LANDSCAPING & NURSERY, INC.,
CHAUTAUQUA COUNTY HIGHWAY DEPARTMENT,
COLD SPRING CONSTRUCTION COMPANY,
CONCEPT CONSTRUCTION CORP.,
C.P. WARD, INC.,
JAMESTOWN BOARD OF PUBLIC UTILITIES,
WATER DEPARTMENT FOR THE CITY OF JAMESTOWN,
JANIK PAVING & CONSTRUCTION, INC.,
JOHN W. DANFORTH COMPANY,
KELEMAN-BAUER CONSTRUCTION, INC.,
KINGSVIEW ENTERPRISES, INC.,
LAKE SHORE PAVING, INC.,
LAKESTONE DEVELOPMENT, INC.,
NEW YORK STATE DEPARTMENT OF TRANSPORTATION,
OAKGROVE CONSTRUCTION CO., INC.,
OMER CONSTRUCTION CO., INC.,
PACOS CONSTRUCTION COMPANY, INC.,
PAVILLION DRAINAGE SUPPLY CO., INC.,
SEALAND CONTRACTORS CORP.,
THE L.C. WHITFORD CO., INC.,
TOM GREENAUER DEVELOPMENT, INC.,
TOWN OF ELLICOTT HIGHWAY DEPARTMENT, and
VILLAGE OF FALCONER HIGHWAY DEPARTMENT,
Third Party Defendants.
_____________________________________________

1

This case is before the Court on the Defendants’ objections to Magistrate Judge
H. Kenneth Schroeder, Jr.’s Report and Recommendation, which recommends (1)
dismissing the third-party complaint as to most of the Third Party Defendants, and (2)
denying the Defendants’ motion for leave to amend the third-party complaint. For the
reasons stated below, the Court adopts the Report and Recommendation.
BACKGROUND
This is a Clean Water Act (CWA) enforcement action brought by the United
States. The United States’ complaint alleges that the Defendants, and/or others acting
at the Defendants’ direction, or with their consent and knowledge, unlawfully discharged
“fill material”—such as rock, soil, and construction debris—into wetlands that are owned
by the Defendants and which fall within the definition of “waters of the United States,” 33
U.S.C. § 1362(7), as that term is defined by regulation.
The United States’ complaint contains two causes of action. First, the United
States alleges that the Defendants, and/or others acting at the Defendants’ direction, or
with their knowledge and consent, engaged in “unauthorized discharges” by “filling . . .
approximately 16.5 acres of Impacted Wetlands without a permit.” Complaint ¶¶ 74-75.
See 33 U.S.C. § 1344(a) (“The Secretary may issue permits . . . for the discharge of
dredged or fill material into the navigable waters at specified disposal sites.”) The
United States’ second cause of action concerns the Defendants’ alleged violation of a
March 24, 2010 Environmental Protection Agency (EPA) Administrative Order (the EPA
Order).

Among other things, the EPA Order directed the Defendants to “cause no

unpermitted discharges into ‘waters of the United States,’” and to “promptly come into
compliance with . . . 33 U.S.C. § 1344, by removing fill material and restoring Impacted

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Wetlands to their pre-existing condition.” Complaint ¶ 86. The complaint alleges that
the Defendants have failed to comply with the EPA Order.
Both causes of action seek civil penalties pursuant to 33 U.S.C. § 1319(d). In
addition, the United States seeks an injunction requiring the Defendants to comply with
the CWA, as well as an order requiring the Defendants to “undertake measures, at
[their] own expense . . . to restore waters of the United States at the Site [at issue] and
to conduct on-site and off-site mitigation for unauthorized impacts to waters of the
United States.” Complaint, Prayer for Relief ¶ 2.
After the United States filed its complaint, the Defendants filed an answer and
third-party complaint.

The third-party complaint identifies twenty-five Third Party

Defendants and alleges that the Defendants “permitted” each Third Party Defendant to
dump fill on the property at issue in the United States’ complaint. The Defendants seek
contribution and indemnification from each of the Third Party Defendants.
The Third Party Defendants 1 then filed a motion for judgment on the pleadings
pursuant to Federal Rule of Civil Procedure 12(c). 2 Judge Schroeder, 3 to whom the
Court

referred

this

case for

all pre-trial

proceedings,

filed

a

Report

and

Recommendation that recommends (1) dismissing the third-party complaint with

1

The motion to dismiss (Docket No. 157) was filed on behalf of twenty-one of the twenty-five Third Party
Defendants. For the remainder of this Decision and Order, the term “Third Party Defendants” refers only
to the twenty-one Third Party Defendants who moved to dismiss the third-party complaint.
2

The Third Party Defendants’ motion was, in fact, a motion to dismiss pursuant to Rule 12(b)(6).
However, because the Third Party Defendants filed their motion to dismiss after filing their answers, the
motion is considered a motion for judgment on the pleadings. See Fed. R. Civ. P. 12(c). As Judge
Schroeder noted, the standard of review for a motion to dismiss is the same as the standard of review for
a motion for judgment on the pleadings. See Docket No. 166 at 3.
3

This case has since been referred to Magistrate Judge Michael J. Roemer.

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prejudice, and (2) denying the Defendants’ motion for leave to amend the third-party
complaint. 4 The Defendants object to these recommendations.
DISCUSSION
The Court reviews Judge Schroeder’s recommendations de novo. 5

See 28

U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b).
1. Contribution
The plain language of New York’s contribution statute, C.P.L.R. § 1401, does not
allow the Defendants to seek contribution for the relief sought by the United States in
this case. Section 1401 provides, in relevant part, that “two or more persons who are
subject to liability for damages for the same . . . injury to property . . . may claim
contribution among them.” N.Y. C.P.L.R. § 1401. To state a claim for contribution, the
Defendants must therefore allege that the Third Party Defendants are “liabl[e] for
damages for the same . . . injury to property” that is at issue in the United States’
complaint. The problem with this theory, however, is that the United States does not
allege that the Defendants are liable for “injury to property.” Rather, the United States
alleges that the Defendants are liable for violations of the Clean Water Act.
The United States’ first cause of action claims that the Defendants permitted
“unauthorized discharges” of fill (Complaint ¶ 75), and that this conduct violates 33

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“The treatment of a motion to amend as dispositive or non-dispositive is not completely settled, but
courts in this district have held that where a magistrate judge’s decision on a motion to amend effectively
dismisses or precludes a claim, the motion is dispositive, while the granting of leave to amend is treated
as non-dispositive.” ExamWorks, Inc. v. Soltys, 17-CV-0080-LJV-MJR, 2017 WL 4712206, at *1 n.1
(W.D.N.Y. Aug. 10, 2017). Thus, the Court treats Judge Schroeder’s decision to deny leave to amend as
a recommendation subject to de novo review.
5

The parties dispute whether the Court should review Judge Schroeder’s recommendations de novo or
for clear error. The Court need not resolve this dispute because, even under a de novo standard, the
Court concludes that Judge Schroeder’s recommendations are correct.

4

U.S.C. § 1311(a)—“[o]ne of the [CWA’s] principal provisions.”

Rapanos v. United

States, 547 U.S. 715, 723 (2006) (plurality). Section 1311(a) makes it “unlawful” to
“discharge . . . any pollutant” “[e]xcept as in compliance with,” as relevant in this case,
33 U.S.C. § 1344. Section 1344, in turn, “authorizes [the Army Corps of Engineers] to
regulate discharge of fill material into ‘navigable waters,’” Solid Waste Agency of
Northern Cook Cnty. v. U.S. Army Corps of Engineers, 531 U.S. 159, 167 (2001), by
authorizing the Corps to “issue permits.” 33 U.S.C. § 1344(a). Thus, the United States’
first cause of action alleges that the Defendants failed to seek a permit authorizing the
discharge of fill into waters of the United States. The crux of this cause of action is not
the discharge of fill; it is, instead, the discharge of fill without a permit.
This is a quintessential regulatory enforcement action.

Although the United

States surely seeks, at a general level, to prevent environmental injury to property, what
the United States seeks to rectify through this lawsuit is an alleged failure to comply with
the CWA’s permitting requirements. The United States’ injury, in other words, is not an
“injury to [the] property” on which fill was allegedly discharged. Indeed, it is not an
“injury to property” at all.
The United States’ second cause of action no more alleges an “injury to property”
than its first. The second cause of action alleges that the Defendants have “failed to
comply” with the EPA Order, which, among other things, ordered the Defendants to
“cause no discharges” of fill material into waters of the United States, “except as
authorized by a valid permit issued by the Corps.” Docket No. 1-5 at 4 ¶ 1. Thus, the
United States’ second cause of action alleges that the Defendants violated an EPA
order which prohibited them from engaging in the same conduct at issue in the first

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cause of action. Again, this is not an “injury to property.” It is, instead, an injury to the
EPA’s authority. In other words, the second cause of action does not seek to rectify
“injury to property”—rather, it seeks to ensure that a federal agency’s orders are
obeyed.
The remedies sought by the United States underscore that § 1401 does not
permit contribution from the Third Party Defendants in this case. Section 1401 allows
contribution when “two or more persons . . . are subject to liability for damages.”
(Emphasis added.)

If the Defendants are ultimately liable to the United States,

however, they are not liable for “damages”; they are liable for what the relevant statute
terms “a civil penalty.” 33 U.S.C. § 1319(d). See Complaint ¶¶ 79, 89. Damages and
penalties are, of course, distinct remedies. See Leist v. Simplot, 638 F.2d 283, 313
n.35 (2d Cir. 1980) (Friendly, J.) (“Penalties and damages . . . are quite different in
nature. The former are punitive and some limit on the regulator’s discretion to impose
them is necessary. The latter are remedial and naturally limited to the loss caused by
the defendant.”)6 See also Tull v. United States, 481 U.S. 412, 422 (1987) (“The action
authorized by § 1319(d) [has] the character” of a “[r]emed[y] intended to punish culpable
individuals, as opposed to those intended simply to extract compensation or restore the
status quo.”) Thus, § 1401’s plain text does not allow contribution for penalties.
In addition to civil penalties, the United States’ complaint seeks an order that the
Defendants, at their own expense, restore the affected wetlands and “conduct on-site

6

Indeed, the factors a court must consider when assessing a civil penalty under the CWA demonstrate
that the United States does not seek “damages” in this case. In imposing a civil penalty under § 1319(d),
a court must consider “the seriousness of the violation or violations, the economic benefit (if any) resulting
from the violation, any history of such violations, any good-faith efforts to comply with the applicable
requirements, the economic impact of the penalty on the violator, and such other matters as justice may
require.” 33 U.S.C. § 1319(d). These are all classic mitigating and aggravating factors that a decisionmaker typically considers when assessing a punitive remedy.

6

and off-site mitigation for unauthorized impacts to waters of the United States, as
appropriate.” Complaint, Prayer for Relief ¶ 2. Although clean up costs, restoration
costs, and mitigation costs may intuitively seem to be the equivalent of tort damages,
these costs are not recoverable under § 1401.
The United States brings this case pursuant to 33 U.S.C. § 1319(b), which
authorizes the United States to bring “a civil action for appropriate relief, including a
permanent or temporary injunction.” Section 1319(b) also provides district courts with
“jurisdiction to restrain . . . violation[s] [of certain provisions of the CWA] and to require
compliance.”

Thus, any clean-up, restoration, and mitigation costs that might be

ordered in this case would be ordered as a form of injunctive relief. See United States
v. Bailey, 571 F.3d 791, 804-05 (8th Cir. 2009) (observing that a CWA restoration order
is a form of injunctive relief); United States v. Cumberland Farms of CT, Inc., 826 F.2d
1151, 1164 (1st Cir. 1987) (“[T]he district court had authority [under 33 U.S.C.
§ 1319(b)] to issue . . . restorative orders so as to effectuate the stated goals of the
Clean Water Act.”); United States v. Smith, 149 F.3d 1172, at *4 (Table) (4th Cir. 1998)
(analyzing a CWA restoration injunction, and noting that it is authorized by 33 U.S.C.
§ 1319(b)). It is, of course, black-letter law that equitable relief, “such as injunction or
restitution,” is not the same as “compensatory damages.” Mertens v. Hewitt Ass’c, 508
U.S. 248, 263 (1993) (interpreting § 502(a)(3) of ERISA) (White, J., dissenting).
The Defendants have not identified, nor has the Court’s research found, any
cases interpreting § 1401 to permit contribution for equitable relief that requires a party
to expend funds—either in the form of restitution, disgorgement, or costs incurred in
complying with an injunction. To the contrary, the word “damages” in § 1401 is a legal

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term of art. As such, it carries “the meaning commonly attributed thereto.” Moskowitz v.
Marrow, 251 N.Y. 380, 389 (1929). The term “damages” refers to “a judicial award in
money, payable as compensation to one who has suffered a legally recognizable injury
or harm.” 1 Dan B. Dobbs, Law of Remedies: Damages—Equity—Restitution, § 3.1, at
277 (2d ed.1993). The United States, however, does not seek “compensation” in this
case.

It seeks an order requiring the Defendants to pay for expenses incurred in

complying with an injunction. See also id. at 278 (observing that courts “may also order
money payments in the exercise of ‘equity’ powers”). The term “damages” in § 1401
does not, then, encompass the costs that may be incurred in complying with a § 1319(b)
restoration injunction.
Thus, § 1401 does not permit the Defendants to seek contribution for the relief
the United States seeks in this case. The Court therefore adopts Judge Schroeder’s
recommendation to dismiss the third-party complaint’s claim for contribution from the
Third Party Defendants.
2. Indemnification
When a party seeks common law (as opposed to contractual) indemnification, “a
party cannot obtain . . . indemnification unless it has been held to be vicariously liable
without proof of any negligence or actual supervision on its own part.” McCarthy v.
Turner Const., Inc., 953 N.E.2d 794, 801 (N.Y. 2011). See also Trustees of Columbia
Univ. v. Mitchell/Giurgola Ass’c, 109 A.D.2d 449, 453 (1st Dept. 1985) (“Since the
predicate of common law indemnity is vicarious liability without actual fault on the part of
the proposed indemnitee, it follows that a party who has actually participated to some
degree in the wrongdoing cannot receive the benefit of the doctrine.”). Put differently,

8

“common-law indemnification is typically available in cases where a party is held liable
solely by operation of law or vicarious liability.”

Diaz v. Calabrese, No. 13-CV-

1531(ARR)(MG), 2014 WL 6883517, at *12 (E.D.N.Y. Dec. 4, 2014). This means that
indemnification “is not available where the party seeking indemnification was ‘partially at
fault’ or ‘responsible in any degree’ in situations where the parties violated the same
duty to the plaintiff.” Amusement Industry, Inc. v. Stern, 693 F. Supp. 2d 319, 326
(S.D.N.Y. 2010) (quoting Monaghan v. SZS 33 Ass’c, L.P., 73 F.3d 1276, 1284-85 (2d
Cir. 1996)).
As Judge Schroeder observed, even if the Third Party Defendants had an
independent duty to “obtain or confirm the existence of a permit before discharging fill
material” (a question the Court need not, and does not, decide), that duty “would not
absolve [the Defendants], as the landowner, of [their] independent duty under the Clean
Water Act to obtain or confirm the existence of a permit before allowing the third-party
defendants to discharge fill material on [the Defendants’] property.” Docket No. 166 at
8. 7 And it certainly would not discharge the Defendants of their duty to comply with the
EPA Order, as the second cause of action alleges they failed to do. Moreover, the
Defendants’ admission that they “permitted” the Third Party Defendants to dump fill

7

See Puget Soundkeeper Alliance v. Cruise Terminals of Am., LLC, 216 F. Supp. 3d 1198, 1223-24
(W.D. Wash. 2015) (holding that defendants—who claimed that they “did not directly cause any of the
alleged unpermitted discharges”—could still be liable for violations of 33 U.S.C. § 1311, because “‘the
CWA imposes liability both on the party who actually performed the work and on the party with
responsibility for or control over performance of the work’”) (quoting Assateague Coastkeeper v. Alan and
Kristin Hudson Farm, 727 F. Supp. 2d 433, 442 (D. Md. 2010)); United States v. Lambert, 915 F. Supp.
797, 802 (S.D. W. Va. 1996) (“The CWA imposes liability both on the party who actually performed the
work and on the party with responsibility for or control over the performance of the work.”); United States
v. Gulf Park Water Co., Inc., 972 F. Supp. 1056, 1063 (S.D. Miss. 1997) (“The ability to control the facility,
coupled with knowledge of the violation, is also sufficient to impose liability under the CWA.”). The Court
cites these cases only for the proposition that the Defendants may be liable under the CWA despite the
fact that the Third Party Defendants allegedly dumped fill. Because the question is not before the Court,
the Court need not decide whether the Third Party Defendants could also be liable under the CWA for the
conduct alleged in the third-party complaint.

9

means that the Defendants are at least allegedly “partially at fault,” or allegedly
“responsible in [some] degree.” Monaghan, 73 F.3d at 1284-85.
Thus, the Defendants may not obtain indemnification for the relief the United
States seeks in this case.

The Court therefore adopts Judge Schroeder’s

recommendation to dismiss the third-party complaint’s claim for indemnification from the
Third Party Defendants.
3. Leave to file an amended complaint
Finally, the Defendants object to Judge Schroeder’s recommendation to deny
their motion for leave to amend the third-party complaint.
Federal Rule of Civil Procedure 15(a)(2) provides that, as applicable here, a
party “may amend its pleading only with . . . the court’s leave. The court should freely
give leave when justice so requires.”

It is well settled that this is a “permissive

standard,” intended to promote the “strong preference for resolving disputes on the
merits.” Williams v. Citigroup Inc., 659 F.3d 208, 212-13 (2d Cir. 2011) (quotation
marks omitted). But this does not mean that “every request to amend must be granted.”
Panther Ptrs. Inc. v. Ikanos Comm., Inc., 347 F. App’x 617, 620 (2d Cir. 2009). For
instance, and as is relevant here, a court need not grant leave to amend where an
amendment would be futile. See, e.g., Williams, 659 F.3d at 214.
Any amendment to the third-party complaint would be futile.

As discussed

above, the Defendants’ contribution claim is not being dismissed because of a pleading
defect; rather, it is being dismissed because New York’s contribution statute, C.P.L.R.
§ 1401, does not permit contribution for the type of relief the United States seeks in its
complaint. No amendment could change that reality. And indemnification is unavailable

10

where, as here, the Defendants are at least allegedly “partially at fault,” or allegedly
“responsible in [some] degree.” Monaghan, 73 F.3d at 1284-85. Again, no amendment
could fix this.
The Court therefore adopts Judge Schroeder’s recommendation to deny the
Defendants’ motion for leave to amend the third-party complaint.
CONCLUSION
For the reasons stated above, the Court adopts Judge Schroeder’s Report and
Recommendation in full.

The Third Party Defendants’ motion for judgment on the

pleadings is granted, and the third party complaint against the Third Party Defendants is
dismissed with prejudice. As noted, that motion was brought by the following Third
Party Defendants:
Allegany Landscape Contractors, Inc.,
Amherst Paving, Inc.,
Birch Grove Landscaping & Nursery, Inc.,
Chautauqua County Highway Department,
Cold Spring Construction,
Company, Concept Construction Inc.,
C.P. Ward, Inc.,
Jamestown Board of Public Utilities,
John W. Danforth Company,
Keleman-Bauer Construction, Inc.,
Kingsview Enterprises, Inc.,
Lakestone Development, Inc.,

11

Lake Shore Paving Inc., L.C.
Whitford Co., Inc.,
Oakgrove Construction, Inc.,
Pacos Construction Company Inc.,
Pavilion Drainage Supply Co., Inc.,
Sealand Contractors Corp.,
Tom Greenauer Development, Inc.,
Town of Ellicott Highway Department, and
Village of Falconer Highway Department
This Decision and Order “adjudicates fewer than all the claims or the rights and
liabilities of fewer than all the parties.” Fed. R. Civ. P. 54(b). Thus, the Clerk of Court
shall not, at this time, enter judgment against the Third Party Defendants. Within two
weeks of the date of this Decision and Order, the Defendants and the Third Party
Defendants who moved to dismiss the third-party complaint shall notify the Court of
whether (and, if so, why) it is appropriate to direct entry of final judgment for the Third
Party Defendants who moved to dismiss the third-party complaint. See Fed. R. Civ. P.
54(b); Novick v. AXA Network, LLC, 642 F.3d 304, 310-11 (2d Cir. 2011) (summarizing
standard for certification under Rule 54(b)).
This case is recommitted to Magistrate Judge Michael J. Roemer for further
proceedings. Judge Roemer shall have authority to act on all matters identified in the
original referral order. See Docket No. 178. However, to ensure that this case moves
forward expeditiously, any further motions to dismiss shall be returnable before this
Court.

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SO ORDERED.

Dated: January 18, 2018
Buffalo, New York

___s/Richard J. Arcara_______
HONORABLE RICHARD J. ARCARA
UNITED STATES DISTRICT JUDGE

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