Opinion
No. X07-CV-07-4030658
July 15, 2009
MEMORANDUM OF DECISION
I
On August 25, 2008, the court, Levine, J.T.R., granted the parties' motion for judgment in accordance with a stipulation for judgment of the same date. That agreement included injunctive relief and imposed monetary penalties on the defendants, Chromium Process Company and its general manager, Daniel Martin (collectively Chromium). On December 9, 2008, the plaintiff, Gina McCarthy, commissioner of the department of environmental protection (DEP), moved this court to schedule a hearing for an order to assess stipulated penalties in accordance with the stipulated judgment. On December 18, 2008, Chromium requested a one-year extension of time to pay the existing civil penalties and, on December 24, 2008, Chromium filed an objection to the assessment of stipulated penalties. Finally, on January 6, 2009, the DEP filed an objection to Chromium's motion for extension of the civil penalty schedule.
A hearing was held on February 10, 2009 at which five witnesses testified: Martin; Norman Tice, the chief executive officer of Chromium (the only witness on the extension issue); Edward Finger, a DEP environmental analyst; Oswald Inglese, Jr., the director of waste permitting and enforcement at the DEP; and Michael Curtis, senior vice president of Fuss O'Neill, Chromium's engineering firm. The parties filed post-hearing briefs by February 27, 2009 and oral argument was heard on March 2, 2009 and again on April 7, 2009. On April 8, 2009, Chromium notified the court that it had filed a petition for bankruptcy and the court stayed the matter on April 15, 2009. The DEP filed a motion for order to reconsider the stay on April 23, 2009. Chromium filed a reply on June 9, 2009 stating that it did not oppose DEP's motion.
On April 29, 2009, Chromium's counsel moved to withdraw as counsel, but withdrew the motion on June 8, 2009.
II
As noted, this court stayed the matter upon notification that Chromium filed a bankruptcy petition. The DEP filed a motion for order requesting reconsideration of the stay pursuant to § 362(b)(4) of title 11 of the United States Code.
Under 11 U.S.C. § 362(a)(1), the filing of a bankruptcy petition stays "the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title . . ." Subsection (b)(4) exempts, however, from stay "the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's . . . police and regulatory power, including the enforcement of a judgment other than a money judgment, obtained in an action or proceeding by the governmental unit to enforce such governmental unit's . . . police or regulatory power . . ."
It is undisputed that the present action is brought by the DEP as a governmental entity under its police and regulatory powers to enforce the parties' stipulated judgment. The DEP seeks the stipulated penalties to which the parties agreed in order to remedy any proven violations of the stipulated judgment and to promote full compliance with the judgment. Therefore, the DEP's action falls within the exception provided for by 11 U.S.C. § 362(b)(4). See Holbrook v. Huntington Kildare, Inc., Superior Court, judicial district of Hartford, Docket No. CV 95 0548320 (September 17, 1996, Sheldon, J.) ( 17 Conn. L. Rptr. 572, 577) (finding that action by DEP to enforce administrative order fell within exception). Consequently, the motion for order to reconsider the stay is granted and the stay is lifted so that the court may consider the assessment of stipulated penalties pursuant to the stipulated judgment.
III
"A stipulated judgment has been defined by our Supreme Court as a contract of the parties acknowledged in open court and ordered to be recorded by a court of competent jurisdiction . . . The essence of the judgment is that the parties to the litigation have voluntarily entered into an agreement setting their dispute at rest and that, upon this agreement, the court has entered judgment conforming to the terms of the agreement." (Internal quotation marks omitted.) Bernet v. Bernet, 56 Conn.App. 661, 665, 745 A.2d 827, cert. denied, 252 Conn. 953, 749 A.2d 1202 (2000). "A stipulated judgment constitutes a contract of the parties acknowledged in open court and ordered to be recorded by a court of competent jurisdiction . . . A stipulated judgment allows the parties to avoid litigation by entering into an agreement that will settle their differences once the court renders judgment on the basis of the agreement . . . A stipulated judgment, although obtained through mutual consent of the parties, is binding to the same degree as a judgment obtained through litigation . . . It necessarily follows that if the judgment conforms to the stipulation it cannot be altered or set aside without the consent of all the parties, unless it is shown that the stipulation was obtained by fraud, accident or mistake." (Internal quotation marks omitted.) Housing Authority v. Goodwin, 108 Conn.App. 500, 506-07, 949 A.2d 494 (2008). "It is not within the court's power to enlarge or lessen the scope of the [stipulated] judgment . . . However, [t]he court has the power to issue orders necessary to protect the integrity of the stipulated judgment . . ." (Citation omitted; internal quotation marks omitted.) Bernet v. Bernet, supra, 666.
IV
Pursuant to paragraph III.E of the stipulated judgment, the DEP filed a motion for order to assess stipulated penalties for Chromium's alleged violations of the judgment. The DEP requests that the court find at least six post-judgment violations; order the payment of the existing $50,000 cash bond to the state treasurer; and order Chromium to replenish the bond and pay the additional $50,000 bond to the state treasurer. If the court finds more than four violations, the bonds will be exhausted and Chromium will then be required, pursuant to paragraph III.F of the stipulated judgment, to surrender its discharge permits.
Paragraph III.D provides that Chromium is to be assessed $25,000 a day for each violation "until the bond is released, fully exhausted or expires." A finding of four violations exhausts both $50,000 bonds. A fifth violation then triggers paragraph III.F requiring Chromium to surrender its discharge permits.
A fifth violation and exhaustion of the bonds also trigger acceleration of the full $600,000 of the civil penalty pursuant to paragraph III.G. Additionally, violations of the injunctive provisions, regardless of their number or exhaustion of the bonds, appears to accelerate payment of the full civil penalty pursuant to paragraph IV.A.3. For whatever reason, the DEP is not requesting that this court follow paragraphs III.G or IV.A.3 and order that the entire civil penalty of $600,000 be levied.
The state has presented evidence of six violations. Finger testified that on September 30, 2008 he took a grab sample of Chromium's discharge into the Housatonic River. After laboratory analysis, this sample revealed a nickel reading of 3.4 milligrams per liter (mg/l) — a finding in excess of Chromium's NPDES permit for nickel of 3.0 mg/l. At that same inspection, Finger found that Chromium did not have its storm water pollution prevention plan revised and approved by a professional engineer — a violation that still existed at the time of the February 10, 2009 hearing. Finger also testified that, during his September 30, 2008 inspection, a catch basin was hydraulically connected to Chromium's NPDES wastewater treatment system — a violation of the permit for several reasons, e.g., the storm water could overwhelm the capacity of the treatment operation and presumably dilute the generated waste stream.
NPDES is an abbreviation for the National Pollution Discharge Elimination System-the regulatory program created by the federal Clean Water Act to regulate the discharge of point source pollutants into the waters of the United States.
Of particular concern to the DEP was that Chromium had not identified this catch basin at any time in the past.
Violations four and five, found during a September 18, 2008 sample and reported in an October 27, 2008 discharge monthly report (DMR), concerned violations of both the acute and chronic toxicity limits in the NPDES permit for the Daphnia pulex species. On October 7, 2008, and reported on October 20, 2008, Chromium revealed that it violated the daily effluent limit for nickel of 2.0 mg/l with a discharge to the sanitary sewer with a measurement of 2.2 mg/l. On January 15, 2009, Chromium reported that it had violated the daily nickel limit again with a discharge of 2.35 mg/l.
Daphnia pulex are crustaceans known as water fleas used to test the toxicity of pollutants. The acute toxicity violation was deemed to be "borderline" and is not being pursued by the DEP.
Chromium does not dispute the specific findings, but instead argues that their impact was minimal. Generally, it maintains that, in an attempt to comply with the stipulated judgment provision to reduce flow immediately to the Housatonic River by 60 percent or to 60,000 gallons per day (and to eliminate discharge requiring an NPDES permit by December 31, 2009), it reduced flow that caused fluctuations in the contaminant concentrations. Chromium states that it is attempting to identify the causes of the compliance issues and is constantly adjusting and testing to ensure compliance. It argues that it has surpassed the 60 percent reduction goal, has already applied for the new state permit to direct all flow to the Shelton publicly owned treatment works (POTW) and has disconnected the copper cyanide process from the waste water treatment system. Hence, it stresses that the nickel violation of September 30, 2008 was a product of the reduced flow. More importantly, it argues that although the single grab sample was in violation, Chromium met the other metal parameters in the grab sample as well as the daily sample parameter for nickel of 2.0 mg/l. In other words, it argues that, while the single sample may have been in violation, the output for the entire day was in compliance.
Chromium also noted that the violation of the nickel parameter on October 7, 2008, as reported in its DMR, was the only violation in October out of some fifty limit parameters. Indeed, it argues that these September and October violations are the only ones over the four-month period in which it was constantly modifying and evaluating the process due to the decreased flow. The January 15, 2009 daily violation is similarly a result of a new testing kit procured by Chromium that had given an acceptable discharge reading, but is believed to have malfunctioned due to lack of heat in the essentially closed facility.
Chromium maintains that the September 18, 2008 aquatic toxicity violation was addressed and did not occur again and that the existence of the problem was included in the stipulated judgment which required resolution by September 26, 2008. Moreover, Chromium notes that it has worked with its engineer, Fuss O'Neill, to eliminate any toxicity problem pending the long-term resolution of relocating any remaining flow to the Shelton POTW.
Chromium finally stresses that the catch basin may have existed for as long as eighty-one years and everyone, including the DEP, had simply missed it in prior inspections. Notwithstanding, Chromium took immediate action to cut and cement the pipe as well as redirect the roof runoff so that the flow no longer enters the treatment process. Chromium argues that the storm water pollution prevention plan has been substantially complete for some time, but due to two identified issues — the catch basin, which is now resolved, and a possible incursion from Shelton storm water — Fuss O'Neill has not certified the plan.
Despite these best intentions of Chromium to remedy or minimize their violations, the evidence illustrates that Chromium violated the injunctive provisions of the stipulated judgment. There has been no evidence of fraud, accident or mistake and the parties have not consented to modify the stipulation. Thus, the court cannot alter or set aside the stipulation. See Housing Authority v. Goodwin, supra, 108 Conn.App. 506-07.
The DEP requests that this court assess penalties in compliance with the stipulated judgment for at least six violations thereby totaling $150,000. It could be argued, of course, that because the storm water pollution prevention plan has been in violation since the stipulated judgment was entered, the penalty could be much greater. Nevertheless, this court finds six violations that total $150,000 in stipulated penalties pursuant to paragraph III.D of the stipulated judgment. Therefore, the cash bond in the sum of $50,000 must be paid to the state pursuant to paragraph III.A. Additionally, Chromium must replenish the $50,000 bond which must also be paid to the state under paragraph III.B. Because this court has found more than four violations, the second bond will be exhausted and the NPDES and state permits will be immediately deemed surrendered pursuant to paragraph III.F.
At the April 7, 2009 hearing, there was some discussion concerning the impact of the discretionary language of paragraph V.16 of the stipulated judgment. Paragraph V.16 states that "in the event that any provision of this judgment is violated by defendants, the superior court may assess an additional civil penalty for each such violation, not to exceed $25,000.00 per day." Additionally, Inglese testified the commissioner "is seeking stipulated penalties up to $25,000 a day" in response to those violations that are listed in the notice. [Transcript, February 10, 2009, p. 26.] Notwithstanding the provision and the testimony, the violations here are controlled by paragraph III.D.
In the event that the bond is not replenished in ten days, then the NPDES and state permit will be immediately deemed surrendered.
There is some question as to whether Chromium can operate its plating process without discharging. The court received only the arguments of counsel. Chromium's counsel indicated that, while it is technically possible to have a closed loop system, Chromium did not have the capability at this time. Therefore, without its permits it would have to cease operations. DEP's counsel argued that it was feasible to operate without a discharge.
In light of Chromium's filing for bankruptcy, it may have considerable difficulty in complying with the above financial demand. This is, however, the penalty that the parties negotiated. While Chromium has substantially reduced its flow, taken steps and made investments to modify its discharge and reasonably explained the subject deficiencies, the parties set forth their agreement concerning violations and penalties in the stipulated judgment and this court cannot interfere with that agreement. See Bernet v. Bernet, supra, 56 Conn.App. 666. Accordingly, the DEP's request for an order of assessment of stipulated penalties, as discussed above, is granted.
It would seem that Chromium's need to seek bankruptcy protection was hastened by the necessity to protect itself from this litigation. Query whether the potential result of an abandoned premises with attendant environmental closure issues is the best outcome in this matter.
V
Section IV of the stipulated judgment required Chromium to pay a civil penalty of $600,000 that could be satisfied through the payment of $75,000 in three equal payments of $25,000, the first due on or before October 29, 2008, the second due on or before December 29, 2008 and the third due on or before March 2, 2009 and through compliance with the injunctive and bond provisions. Chromium provided the bond as required and made the first of the three $25,000 payments, but, as noted, seeks a one-year extension to make the remaining two payments. It argues that the extension is required due to economic conditions that caused its production to be reduced to twelve days in October 2008, five days in November 2008, three days in December 2008 and seven days in January 2009. It stressed that it was expending funds to meet compliance requirements and permit applications anticipated by the stipulated judgment and that, if it was required to make the payments, it would be forced into bankruptcy. Tice also testified that Chromium requested and was granted a six-month moratorium by the Connecticut department of economic and community development on its loan payments as well as an additional six months of reduced payments. The DEP objected to the extension challenging, among other things, Chromium's claim that it had suffered a material economic downturn in the current market.
Chromium does not manufacture products; it finishes products supplied by others. Those products, many related to the automotive industry, have not found their way to Chromium's door given current economic conditions.
The motion to extend the time to pay the civil penalty has arguably lost its significance because Chromium filed for bankruptcy protection on April 8, 2009 — the day after the oral argument was completed. Nevertheless, this court will defer ruling on the motion in light of Chromium's bankruptcy.
Additionally, although DEP does not appear to seek acceleration, the motion to extend time to make the remaining payments would seem to be moot because violations of the injunctive provisions appear to accelerate payment of the full civil penalty pursuant to paragraph IV.A.3.
VI
For the foregoing reasons, the motion to reconsider the stay is granted and the stay is lifted; the motion for an order to assess stipulated penalties is granted; and the court's ruling on the motion to extend the civil penalty payments is deferred.