ROLLINGWOOD ACRES, INC., SMITHFIELD PEAT CO., INC., SMITHFIELD CRUSHING CO., LLC Appellants,
RHODE ISLAND DEPARTMENT OF ENVIRONMENTAL MANAGEMENT, et al. Appellees.
Providence County Superior Court
For Plaintiff: Michael A. Kelly, Esq.; Joelle C. Sylvia, Esq.
For Defendant: Marisa A. Desautel, Esq.
Rollingwood Acres, Inc. (Rollingwood Acres), Smithfield Peat Co., Inc. (Smithfield Peat), and Smithfield Crushing Co., LLC (Smithfield Crushing) (collectively, Appellants) bring this appeal from a decision of the Administrative Adjudication Division of the Rhode Island Department of Environmental Management (AAD). In its decision, AAD denied Appellants' request for recovery of reasonable litigation expenses under the Rhode Island Equal Access to Justice for Small Businesses and Individuals Act (EAJA), G.L. 1956 §§ 42-92-1 through 42-92-8. The Rhode Island Department of Environmental Management's Office of Compliance and Inspection (DEM or, specifically, OC&I) previously charged Appellants with violating various water quality and oil control statutes and regulations. Appellants successfully defended most of those charges and then brought the subject claim to recover litigation expenses they incurred in connection with responding to the allegations asserted against them. This Court exercises jurisdiction over this matter pursuant to §§ 42-35-15, 42-92-5. For the reasons set forth herein, the Court affirms the decision of the AAD hearing officer denying recovery of reasonable litigation expenses.
Facts and Travel
This Court previously has detailed the facts of this case in two prior decisions. Rollingwood Acres, Inc. v. Rhode Island Dep't of Envtl. Mgmt., No. PC-2012-3876, 2013 WL 4662844 (R.I. Super. Ct. Aug. 26, 2013); Rollingwood Acres, Inc. v. Rhode Island Dep't of Envtl. Mgmt., No. PC-2012-6341, 2013 WL 4662845 (R.I. Super. Ct. Aug. 26, 2013). The Court limits the recitation of facts here to those relevant to the limited issue before the Court.
Rollingwood Acres is the record owner of property located at 961 Douglas Pike, Smithfield, Rhode Island, identified as Town Assessor's Plat 46, Lots 71 and 76 (the Property). (Appellants' Ex. B, In re Rollingwood Acres, Inc./Smithfield Peat Co., Inc./Smithfield Crushing Co., LLC, AAD No. 06-004/WRE, Rhode Island Department of Environmental Management Administrative Adjudication Division Decision, June 27, 2012, hereinafter NOV AAD Decision, at 2 ¶ 2.) Smithfield Peat is a corporation that operates a registered hazardous waste generator as well as a leaf and yard waste composting facility at the Property. (NOV AAD Decision, at 2 ¶¶ 3-5.) Smithfield Crushing is a corporation that operates a rock crushing facility at the Property. (NOV AAD Decision, at 2 ¶¶ 6, 7.)
In May 1982, DEM issued a freshwater wetlands permit to Smithfield Peat, authorizing the corporation to excavate, fill, and grade some of the Property for the purposes of installing two storm water detention basins, which were required to have fifteen-inch diameter discharge pipes. (NOV AAD Decision, at 2 ¶ 8; 40 ¶ 13.) Appellants constructed the structure in conformance with the permit obtained, at an expense of over $100, 000. (NOV AAD Decision, at 40 ¶ 14.)
1996 Alteration to Drainage System
In 1996 and 1997, the Rhode Island Department of Transportation (DOT) conducted a project to improve Route 7, including a portion adjacent to Appellants' Property. (NOV AAD Decision, at 40 ¶ 11.) Although DOT's written plan did not include alterations to Appellants' drainage structure, DOT altered the structure, including replacing the existing fifteen-inch diameter pipe with an eighteen-inch diameter pipe. (NOV AAD Decision, at 40 ¶¶ 16, 20.) DOT took this action without Appellants' knowledge or permission. (NOV AAD Decision, at 40 ¶¶ 18, 21.) The alteration to a larger diameter pipe increased the discharge of sediment from the pipe, resulting in the discharge water having higher turbidity. (NOV AAD Decision, at 40 ¶ 23.)
In December 1996, Bill Riccio, a DOT employee, filed a complaint with DEM that Appellants' drainage structure was discharging sediment-laden water into an unnamed stream. (NOV AAD Decision, at 41 ¶ 24.) In January 1997, OC&I followed up on the complaint with two site inspections of the Property. (NOV AAD Decision, at 41 ¶ 25.) The site inspector, Sean Carney, observed turbid water being discharged into the stream. (NOV AAD Decision, at 41 ¶ 26.) On June 3, 1997, OC&I issued a Notice of Intent to Enforce (NOIE) against Rollingwood Acres because of sediment-laden water discharged to an unnamed stream. (NOV AAD Decision, at 2 ¶ 9.) The NOIE included an order to remedy the unpermitted discharge. (NOV AAD Decision, at 29.)
2005 and 2006 Follow-up Inspections
OC&I inspectors did not visit the Property again until February 9, 2005. A site inspector, Peter Naumann, returned to the Property for a follow-up inspection because he was in the area investigating an unrelated complaint. (Appellants' Ex. E.) During the February 9, 2005 site inspection, Naumann observed the appearance of oil at the site. (Appellants' Ex. E.) He traced the source of the oil onto Appellants' Property and then traced the flow from the drainage basin until it eventually reached a tributary stream of Stillwater Pond. (Appellants' Ex. E.) Naumann contacted Thomas Campbell, an employee with DEM Emergency Response. (Appellants' Ex. E.) Campbell responded to the site, and he instructed Keith Lewis, a Smithfield Peat equipment operator who was the first employee to arrive, to engage an oil spill remediation contractor. (Appellants' Ex. E.) Smithfield Peat engaged Lincoln Environmental—with whom Smithfield Peat had an environmental response agreement. (NOV AAD Decision, at 3 ¶¶ 10, 21.) Lincoln Environmental arrived at the Property and began responding to the spill in less than three hours.(Appellants' Ex. E.)
In the presence of Campbell, Lewis, and a representative of the Smithfield Fire Department, Naumann further traced the oil source on Appellants' Property. Naumann determined that it originated from a pile of stone and waste rock that Smithfield Peat obtained from the Narragansett Bay Commission Combined Sewer Overflow Tunnel project. (Appellants' Ex. E.)
The next day, Naumann returned to the Property to take samples of the runoff water. (Appellants' Ex. F.) He collected five samples for multiple tests, including samples to test for turbidity and the presence of hydrocarbons. (Appellants' Ex. F.) All of the water samples were collected from the Property or downstream of the Property, except for one "background sample" that was collected from a nearby stream that was not part of the runoff stream system. (Appellants' Ex. F.) The samples did reveal the presence of hydrocarbons, indicating that a petroleum product was released on the Property. (NOV AAD Decision, at 42 ¶¶ 47, 48.) Upon investigation, Appellants learned that the oil in question had originated from a leak at the Narragansett Bay Commission property that had contaminated some of the stone waste brought to Appellants' Property. (NOV AAD Decision, at 22.)
Another OC&I site inspector, Patrick Hogan, returned to the Property on April 4, 2006. (Appellants' Ex. G.) Hogan testified that he returned specifically to take water samples. (Tr. 51-52, Sept. 28, 2011.) David Chopy, Chief of OC&I,  ordered the additional sampling inasmuch as the samples collected in 2005 could not be used to assess turbidity because the background sample had been collected from an unconnected stream. (NOV AAD Decision, at 18.) While at the Property, Hogan observed that the discharge water was the color of light coffee. (Appellants' Ex. G.) Hogan collected six water samples, although he "was not able to find a suitable upstream location for the stream to take a background water sample." (Appellants' Ex. G.) Hogan later testified that he could not find an upstream location for sampling because "[t]here is no upstream with this location . . . [t]he water seems to begin right there." (Tr. 65, Sept. 28, 2011.) Instead, Hogan collected a sample approximately 1500 feet downstream from the discharge for use as the background sample. (Appellants' Ex. G.)
On November 6, 2006, OC&I issued a Notice of Violation (NOV) against Appellants. (Compl. ¶ 9.) The NOV alleged violations of the Rhode Island Water Pollution Act,  DEM's Water Quality Regulations,  the Rhode Island Oil Pollution Control Act,  DEM's Oil Pollution Control Regulations,  and DEM's Regulations for The Rhode Island Pollution Discharge Elimination System. The NOV included an administrative penalty of $31, 470. (NOV AAD Decision, at 2 ¶ 1.)
Administrative Adjudication Division and Superior Court
The Appellants appealed the NOV to DEM's AAD. (Compl. ¶ 10.) The AAD conducted a hearing on the matter and issued a decision on June 27, 2012. The hearing officer dismissed all allegations based on violations of the Water Pollution Act because he found that DEM had not met its burden of proof by a preponderance of evidence that Appellants had caused discharge of turbid water into the waters of the State. (NOV AAD Decision, at 41 ¶ 34.) This finding was based on the lack of adequate water samples because no upstream sample was collected as a background. (NOV AAD Decision, at 41 ¶¶ 32, 33.)
The hearing officer dismissed two of the three allegations of the violation of the Rhode Island Oil Pollution Control Act and Regulations. The hearing officer concluded that Appellants received product contaminated with oil and therefore were responsible for discharge of petroleum in the State. (NOV AAD Decision, at 43 ¶ 60.) However, the hearing officer found that Appellants were not aware of the presence of the oil and therefore were not liable for failure to immediately notify DEM of the release. (NOV AAD Decision, at 43 ¶¶ 58, 61.) Additionally, the hearing officer found that Appellants timely contacted an environmental cleanup responder and began remediation on the site. (NOV AAD Decision, at 43 ¶¶ 64, 65.) Therefore, the hearing officer concluded that Appellants did not violate oil pollution laws for failure to immediately cleanup the release of oil. (NOV AAD Decision, at 43 ¶ 63.) The hearing officer reduced the administrative penalty to $2615, approximately eight percent of the original penalty. (NOV AAD Decision, at 45.)
On July 27, 2012, after receipt of the NOV AAD Decision, Appellants filed a request for attorney's fees and costs under the EAJA and Rule 20.00 of the AAD Rules of Practice and Procedure. (Compl. ¶ 12.) On September 18, 2012, the hearing officer denied Appellants' request, finding that Appellants were not "parties" under the EAJA. (Appellants' Ex. A.)
Appellants appealed that determination to the Superior Court. A justice of this Court rendered a decision on August 26, 2013, granting the appeal and finding that Appellants had standing to pursue litigation expenses under the EAJA. See Rollingwood Acres, Inc., 2013 WL 4662845 at *5. The Court remanded the case to the AAD to consider Appellants' claim for litigation expenses consistent with the Court's ruling. Id.
Upon reconsideration, the hearing officer again denied Appellants' request for attorney's fees and costs. (Compl. ¶ 19.) The hearing officer first observed that this Court established that Appellants were parties under the EAJA. (In re Rollingwood Acres, Inc./Smithfield Peat Co./Smithfield Crushing Co., LLC, AAD No. 06-004/WRE, Rhode Island Department of Environmental Management Administrative Adjudication Division Decision, Feb. 28, 2014, hereinafter 2014 AAD Decision, at 4-5.) Assuming standing, he then proceeded to consider the claim on its merits.
In rendering his decision, the hearing officer noted that the only outstanding charge against Appellants was for discharge of oil. He found that Appellants were prevailing parties on the other charges which had been dismissed. (2014 AAD Decision, at 5-6.)
However, the hearing officer determined that DEM was substantially justified in initiating the investigation because the investigation was based on a complaint of potential violations. (2014 AAD Decision, at 7-8.) The hearing officer also found that DEM remained substantially justified in pursuing the charges. (2014 AAD Decision, at 10-11.) Therefore, the hearing officer concluded that because DEM had been substantially justified in proceeding against Appellants throughout the investigation, Appellants were not entitled to recover their ...