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United States v. Whitehill

United States District Court, W.D. New York

January 18, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
DAVID A. WHITEHILL and DEPENDABLE TOWING & RECOVERY, INC. Defendants/Third Party Plaintiffs,
v.
ALLEGANY LANDSCAPE CONTRACTORS, INC., MHERST 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.

          DECISION AND ORDER

          HONORABLE RICHARD J. ARCARA UNITED STATES DISTRICT JUDGE

         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 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 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 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 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 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 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 ...


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