Opinion
No. 2-790 / 01-1217.
Filed February 28, 2003.
Appeal from the Iowa District Court for Linn County, Patrick R. Grady, Judge.
The petitioners seek further review of the decision of the district court affirming the finding of an asbestos-removal violation. AFFIRMED.
Douglas D. Herman of Strittmattr Herman, Monticello, for appellants.
Thomas J. Miller, Attorney General, and David R. Sheridan and David S. Steward, Assistant Attorneys General, for appellee.
Heard by Mahan, P.J., and Vaitheswaran, J., and Brown, S.J.
Senior Judge assigned by order pursuant to Iowa Code section 602.9206 (2003).
Petitioners, Affordable Asbestos Removal, Inc., and its sole officer and stockholder, Jeffry Intlekofer, appeal the decision of the district court upholding, in part, the decision of the Iowa Department of Natural Resources (IDNR). The petitioners were ordered to stop illegal removal and disposal of asbestos-containing materials from a project and a monetary penalty was imposed. We agree with the district court's disposition of the case and therefore affirm.
Both Affordable Asbestos and Intlekofer are petitioners and both are included in the various papers and orders in the case. Since their interests appear identical, we will refer only to Affordable Asbestos in our discussion here.
I. Background facts and proceedings.
The Iowa air quality control statutes are found in Iowa Code chapter 455B. The Iowa Environmental Protection Commission (EPC) is charged with promulgating regulations governing air contamination and the control of emissions. Iowa Code § 455B.133 (1999). Consequently, the EPC has adopted federal regulations regarding asbestos removal. Iowa Admin. Code r. 567-23.1(B) (2002) These standards for asbestos and other air pollutants are known as the National Emission Standards for Hazardous Air Pollutants. The IDNR is required to carry out the EPC's policies. Iowa Code § 455B.105.
Affordable Asbestos was the successful bidder on a project involving the removal, cleanup, and disposal of regulated asbestos-containing material (RACM) from The Kensington, an assisted living facility for the elderly in Fort Madison, Iowa. On April 17, 1998, while the removal project was ongoing, Marion Burnside, an IDNR inspector, made an onsite inspection. He observed suspect debris in the penthouse, an area which had already been processed by Affordable Asbestos. He photographed the material and took four samples, which he placed in plastic bags and labeled. These were forwarded to the University of Iowa Hygienic Laboratory. On May 1, 1998, the Hygienic Laboratory reported two of the samples tested positive for asbestos.
Intlekofer learned of the inspection. He called Burnside and asked if there would be a notice of violation. In this short conversation Burnside advised he did not know.
A Notice of Violation was issued by IDNR on October 29, 1998 citing Affordable Asbestos for violating two of the federal asbestos removal and disposal regulations the IDNR is charged with administering. The Notice stated that questions concerning it should be addressed to Burnside and included his telephone number. Intlekofer called Burnside and asked why the Notice was sent. According to Intlekofer, Burnside responded it was out of his hands. So far as the record shows no further contact was made or attempted between Affordable Asbestos and IDNR.
On June 25, 1999, IDNR issued its administrative order, as authorized by Iowa Code sections 455B.134(9) and 455B.138(1), charging Affordable Asbestos with violating 40 C.F.R. 61.145(c)(6)(i) by failing to keep RACM wet until collected and contained, and 40 C.F.R. § 61.150(a)(1)(iii) by failing to seal RACM in a leak-tight container or wrapping. The order required Affordable Asbestos to stop all illegal removal and disposal of asbestos-containing materials, to comply with applicable regulations in the future, and pay a civil penalty totaling $10,000. A substantial amount of the total penalty was attributable to the extensive record of prior violations accumulated by Affordable Asbestos, its predecessors, or Intlekofer.
Affordable Asbestos appealed to the EPC. Iowa Code § 455B.138. A hearing was held before an Administrative Law Judge (ALJ) who, in a comprehensive proposed decision upheld both of the IDNR's charges, but reduced the penalty to $6100. This decision was affirmed and adopted by the EPC.
Affordable Asbestos then appealed to the district court. The district court upheld the agency ruling as to 40 C.F.R. 61.145(c)(6)(i), but found insufficient evidence to support a violation of 40 C.F.R. § 61.150(a)(1)(iii). It remanded the case to recalculate the civil penalty. Following remand the penalty was modified to a total of $3100. This appeal followed.
On appeal here, Affordable Asbestos contends (1) the IDNR was without jurisdiction to find any violation or impose any penalty because it had failed to follow Iowa Code section 455B.138(1), which requires informal negotiations to resolve the problem before issuing an order; (2) the IDNR failed to show a sufficient foundation for the admission of Burnside's testimony and the Hygienic Laboratory findings; (3) there was insufficient evidence to show a violation of 40 C.F.R. 61.145(c)(6)(i); and (4) the civil penalty was excessive.
II. Review standard.
Appellate review of Iowa Code chapter 455B proceedings is under Iowa Code chapter 17A, the Iowa Administrative Procedure Act. Iowa Code § 455B.140. We review agency decisions for errors of law. Midwest Automotive III, LLC, v. Iowa Dep't of Transp., 646 N.W.2d 417, 422 (Iowa 2002). However, rulings on the admission of evidence are reviewed for an abuse of discretion. State v. Edgerly, 571 N.W.2d 25, 27 (Iowa Ct.App. 1997). Generally, administrative decisions "are to be made by the agencies, not the courts." Leonard v. Iowa State Bd. of Educ., 471 N.W.2d 815, 815 (Iowa 1991). However, although we give limited deference to the agency on legal questions within its expertise, the court is the final arbiter of the law. Midwest Automotive, 646 N.W.2d at 422.
In reviewing the district court's decision, we apply the standards of section 17A.19(10) to the agency action to determine whether our conclusions are the same as those of the district court. If they are, we affirm; otherwise, we reverse. An agency's factual findings are binding on appeal if supported by "substantial evidence in the record made before the agency when the record is viewed as a whole." Iowa Code § 17A.19(10)(f). Evidence is substantial when a reasonable person could accept it as adequate to reach the same findings. Conversely, evidence is not insubstantial merely because it would have supported contrary inferences, or because two inconsistent conclusions could be drawn from it. Therefore "[t]he ultimate question is not whether the evidence supports a different finding but whether the evidence supports the findings actually made" by the agency.
Ludtke v. Iowa Dep't of Transp., 646 N.W.2d 62, 65 (Iowa 2002) (citations omitted).
III. Jurisdiction.
Iowa Code section 455B.138(1) prescribes the procedure IDNR is to follow when air quality violations are alleged.
When the director has evidence that a violation . . . has occurred, the director shall notify the alleged violator and, by informal negotiation, attempt to resolve the problem. If the negotiations fail to resolve the problem within a reasonable period of time, the director shall issue an order directing the violator to prevent, abate, or control the emissions or air pollution involved.
Iowa Code § 455B.138(1) (emphasis added). Affordable Asbestos contends the italicized part of the statute imposes a mandatory duty of negotiation on IDNR, and its alleged failure to negotiate with Affordable Asbestos deprives IDNR of jurisdiction to proceed further in its enforcement attempts. This contention implicates the mandatory/directory dichotomy enunciated in Taylor v. Department of Transportation, 260 N.W.2d 521 (Iowa 1977).
We believe the issue here is the authority of the agency to proceed, rather than the agency's jurisdiction. State v. Emery, 636 N.W.2d 116, 119 (Iowa 2001) (holding a court, although it has subject-matter jurisdiction, may nevertheless lack authority to hear a particular case where it has failed to follow statutory procedure). However, both parties have considered the issue as one of jurisdiction and we shall likewise do so.
Mandatory and directory statutes each impose duties. The difference between them lies in the consequence for failure to perform the duty. Whether the statute is mandatory or directory depends upon legislative intent. When statutes do not resolve the issue expressly, statutory construction is necessary. If the prescribed duty is essential to the main objective of the statute, the statute ordinarily is mandatory and a violation will invalidate subsequent proceedings under it. If the duty is not essential to accomplishing the principal purpose of the statute but is designed to assure order and promptness in the proceeding, the statute ordinarily is directory and a violation will not invalidate subsequent proceedings unless prejudice is shown.
Taylor, 260 N.W.2d at 522-23. The ALJ found the statute directory; the district court disagreed and held it was mandatory, but further found IDNR had substantially complied with the negotiation requirements.
The general rule is that statutes directing "the time, form and mode of proceeding of public functionaries are directory because they are not of the essence of the thing to be done but are designed to secure system, uniformity and dispatch in public business." Taylor, 260 N.W.2d at 523. Although this rule has been applied most frequently in situations involving a failure to observe time limitations, e.g., In re Sopoci, 467 N.W.2d 799, 800 (Iowa 1991); Taylor, 260 N.W.2d at 522-23, it is not limited to that context. State v. Morgan, 559 N.W.2d 603, 610 (Iowa 1997) (holding statute authorizing separate jury pools in Lee County directory, not mandatory); In Re Marriage of Franken, 448 N.W.2d 324, 326 (Iowa 1989) (holding manner of serving notice of wage assignment directory, not mandatory). In Upper Iowa River Preservation Association v. Iowa Natural Resources Commission, 497 N.W.2d 865 (Iowa 1993), a case quite similar to this one, the Iowa Natural Resources Commission designated a portion of the Upper Iowa River as a protected water area and adopted a management plan for the river. Opponents of the commission's decision contended the action should be set aside because the commission staff did not meet with landowners prior to taking action, as required by Iowa Code section 108A.10. The supreme court rejected this argument, finding the requirement to hold these meetings was directory, not mandatory. Upper Iowa River Pres. Ass'n, 497 N.W.2d at 869-70.
Commission staff shall meet separately or in small groups with landowners within interim protected water areas during the preparation of the master plan to establish workable and acceptable agreements for the protection of the area and its accompanying resources in a manner consistent with the purposes of the chapter and the interest and concerns of the landowner.
Iowa Code § 108A.10 (now codified as Iowa Code § 462B.10 (2003))
We conclude the negotiation requirement is directory, not mandatory. The general purpose of the IDNR is to protect the environment and conserve our natural resources. Iowa Code § 455A.2. The EPC is charged with developing programs for "the abatement, control, and prevention of air pollution in this state."
Iowa Code § 455B.133(1). "Informal negotiation" is simply a preliminary step in implementing these goals. The main objective of the statute can be accomplished without this preliminary enforcement procedure. These negotiations may well be desirable in designing an orderly process for the control of Iowa's air quality, but they are tangential to the main purpose, and the regulations can be enforced with or without negotiations. By negotiating, compliance may be accomplished early on without the necessity of additional enforcement proceedings — a worthwhile objective for both IDNR and the alleged violator, but not an essential one.
Affordable Asbestos asserts the use of "shall" in section 455B.138(1) results in a mandate to comply with its terms. This argument was expressly rejected in Taylor, 260 N.W.2d at 523. We do not think Affordable Asbestos should be able to defeat the salutary purpose of the statute by relying on IDNR's arguable oversight or neglect in totally complying with the statute's directives. See Taylor, 260 N.W.2d at 523 (stating if time-for-hearing requirement were mandatory it would avoid license revocation on technical basis and undermine legislative purpose to remove dangerous drivers from highways).
The district court relied on other sections of the air quality control statute to support its conclusion the statute was mandatory. Iowa Code section 455B.139 authorizes IDNR to issue emergency desist orders without notice. Iowa Code section 455B.134(10) encourages voluntary cooperation by violators. We do not think these provisions have a sufficient nexus with the statute at issue to overcome the reasons we have set out above for holding the statute directory.
Affordable Asbestos has neither alleged nor demonstrated how any absence of negotiations has prejudiced it. If it felt additional negotiations would have been beneficial, it could have initiated further discussions. Therefore, we conclude the alleged failure of IDNR to conduct informal negotiations did not preclude IDNR from issuing its order regarding Affordable Asbestos' violations of chapter 455B.
Although we disagree with the district court as to the mandatory nature of section 455B.138(1), we agree that even if the negotiating provision were deemed jurisdictional, IDNR substantially complied with the statute.
Substantial compliance means following the statute sufficiently to carry out its intent. Brown v. John Deere Waterloo Tractor Works, 423 N.W.2d 193, 194 (Iowa 1988). Whether substantial compliance is shown in a particular situation is a question of fact to be determined in each case. Id. We agree with the ALJ's conclusion, adopted by the district court, that the extensive history of violations by Affordable Asbestos, the detailed Notice of Violations issued, and the invitation to call the investigator is substantial evidence supporting this finding of the agency and the district court.
IV. Foundation for evidence.
Affordable Asbestos asserts the investigator's sampling procedure and the subsequent custody of the materials were so lacking in foundation they should not have been admitted. After observing the material in the penthouse which he suspected contained asbestos, Burnside placed the material in four plastic bags, labeled each one, and sealed them. Several days later, the bags were delivered to a Robin White. As shown by the chain of custody form, they then came into the custody of a Bernie Kirby. The form discloses the samples were eventually analyzed by the University of Iowa Hygienic Laboratory which indicated two of the four samples contained a proscribed amount of asbestos.
The foundation for the admission of the lab report and its results is far from a paragon. However, administrative proceedings are not subject to technical rules of evidence. IBP, Inc. v Al-Gharib, 604 N.W.2d 621, 630 (Iowa 2000). Hearsay evidence may be considered substantial evidence in an administrative proceeding. Gaskey v. Iowa Dep't of Transp., 537 N.W.2d 695, 698 (Iowa 1995). Although there are gaps in the process that could have benefited by further explanation, we presume that the IDNR and its officials properly performed the duties with which they were charged unless there is clear evidence to the contrary. Petersen v. Harrison County, 580 N.W.2d 790, 793 (Iowa 1998). There is no such contrary evidence. The ALJ found the samples and chain of custody document to be adequate for the admission of the test results. We agree there is substantial support in the record supporting this discretionary admission of the test results.
V. Substantial evidence of violation.
The decision of the district court after reviewing the agency action was that only the violation of 40 C.F.R. 61.145(c)(6)(i) , failure to keep RACM wet until it was properly disposed, was supported by substantial evidence. Affordable Asbestos claims this violation also lacks substantial support in the record. We believe the district court concisely and accurately dealt with this contention.
40 C.F.R. § 61.145(c)(6)(i) states: "(6) For all RACM, including material that has been removed or stripped: (i) Adequately wet the material and ensure that it remains wet until collected and contained or treated in preparation for disposal in accordance with section 61.150 . . . ."
Mr. Burnside testified he observed small amounts of suspect debris in the penthouse. This debris was described as fibrous, clean, white and dry. Mr. Burnside testified the appearance of the debris was not consistent with asbestos intentionally undisturbed. Further, all of the experts who observed photographs of the debris agreed they would have required it to be cleaned up. There is substantial evidence in the record to support a finding that Affordable Asbestos violated 40 C.F.R. § 61.145(c)(6)(i).
We agree with this conclusion.
VI. Excessive penalty.
The final error urged by Affordable Asbestos is that the penalty imposed is excessive. The EPC is authorized to establish a schedule of civil penalties up to $10,000 for violations of chapter 455B. Iowa Code § 455B.109(1). The EPC regulations list the relevant factors which are to be considered. They are cost savings to the violator by non-compliance, the gravity of the violation, the culpability of the violator, the maximum penalty authorized, whether assessment of administrative penalties is the most appropriate way to deter future violations, and any other relevant factor. Iowa Admin. Code r. 567-10.2(1)-(5).
Following the remand by the district court, these penalties were assessed:
(a) $100 for economic benefit; (b) $1000 for the gravity of the violation; and (c) $2000 for the culpability of Affordable Asbestos, for a final total of $3100. Except for the economic benefit assessment, these represent a substantial reduction from the amounts originally proposed by IDNR. The evidence in the record regarding the adverse health effects of exposure to asbestos and particularly the extensive history of prior violations by Affordable Asbestos and its predecessors provides substantial support for the penalties finally determined. As the agency points out, Affordable Asbestos' contentions might well justify lesser penalty amounts, but it is basic administrative law that the issue is whether the evidence supports the decision actually made, not one that could have been made. We conclude it does.
The record indicates at least twenty previous Notice of Violation letters, two administrative orders, and six referrals to the Iowa Attorney General for failure to adequately deal with RACM.
VII. Summary.
In this review of agency action, we determine the Iowa Department of Natural Resources had jurisdiction and authority to issue its order to Affordable Asbestos concerning its violation of asbestos removal regulations and imposing civil penalties for the violation because the statute requiring the agency to negotiate with the violator before issuing the order was directory, not mandatory. In any event, the agency substantially complied with the statute. We further determine there was adequate foundation for the admission of the investigator's findings and the test results indicating violations of asbestos removal regulations. There was substantial support in the record for the single violation finally assessed, and the civil penalty imposed for that violation was not excessive.
We affirm the decision of the district court finding a violation of 40 C.F.R. § 61.145(c)(6)(i) by Affordable Asbestos Removal, Inc. and Jeffry Intlekofer, and the civil penalty of $3100 imposed following remand for that purpose.