APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA (D.C. Civil No. 73-454)
Before: HUNTER, WEIS, and GARTH, Circuit Judges
This appeal requires us to determine whether a private company operating under federal contract is a federal "department, agency or instrumentality" for the purposes of section 313 of the Federal Water Pollution Prevention Act Amendments of 1972 (Act).*fn1 That provision requires inter alia that a federal "department, agency or instrumentality" comply with State and local pollution control requirements "to the same extent that any person is subject to such requirements."
The district court determined that Chamberlain Manufacturing Corporation (Chamberlain), the company whose operations and whose relationship to the Government is involved here, is a private independent contractor and not a federal agency for purposes of section 313. That holding resulted in the district court granting the summary judgment motion brought by the Pennsylvania Environmental Hearing Board (Board). 431 F. Supp. 747 (M.D. Pa.). We affirm.
The United States owns the premises, installations and equipment at the Scranton Army Ammunition Plant (Plant) in Scranton, Pennsylvania. The primary function of the Plant is the production of metal parts for ammunition shells used solely by the United States.*fn2 Chamberlain, an Iowa corporation having a certificate of authority to do business in Pennsylvania, operates the Plant under a facilities contract with the United States.*fn3 That contract designates Chamberlain as "an independent contractor and not an agency of the Government,"*fn4 and provides that the personnel employed "in carrying out the work hereunder... shall constitute employees of the Contractor [Chamberlain] and not of the Government."*fn5
From July, 1970 through October, 1972, the operation of the plant by Chamberlain resulted in the discharge of 1.5 million gallons per day of untreated wastes from the Plant into Roaring Brook, a tributary of the Lackawanna River. "As a result of the industrial waste discharge, no fish could have lived within a half mile of the plant, and the lower life forms were also depressed."*fn6
During this period, "Chamberlain knew that its operation of the plant and the attendant discharge of industrial wastes from the plant caused substantial pollution of Roaring Brook."*fn7 Chamberlain however was not unresponsive: commencing in 1966 and at least through October, 1972, Chamberlain engaged in a series of pollution abatement measures which, by October, 1972, resulted in abatement of the Plant's industrial waste discharge.
The parties stipulated that in order to receive reimbursement from the United States for its pollution control programs, Chamberlain required the approval of the Department of the Army prior to their implementation.*fn8 The facilities contract between the Government and Chamberlain nonetheless specified that Chamberlain was to comply with all governmental laws and regulations, and was to "procure all necessary permits and licenses," including those of state and local authorities.*fn9 Additionally the facilities contract contains a specific section dealing with Chamberlain's responsibility to comply with state pollution control laws, and provides among other things that "[in] the event any Governmental agency, local, state or federal, shall assess fines, institute suit, or otherwise disrupt, curtail, or order cessation of production, the Government shall hold harmless and indemnify the contractor for costs and damages incurred."*fn10
In 1972, the Pennsylvania Department of Environmental Resources (Department) filed a complaint for civil penalties for water pollution with the Board against Chamberlain and other defendants.*fn11 The complaint alleged violations of the Pennsylvania Clean Streams Law,*fn12 and sought money damages pursuant to the 1970 Amendments to that act. None of the defendants filed an answer. On October 19, 1972, the Board entered a default judgment against Chamberlain and the commanding officer of the facility. (App. 17, 35).
At a subsequent penalty hearing, an Assistant United States Attorney made a limited appearance on behalf of all defendants. He argued that under the doctrine of sovereign immunity the Board lacked jurisdiction to "impose fines or penalties upon federal employees or federally operated facilities...."*fn13 The Board denied the Government's objection to the Board's assertion of jurisdiction. This jurisdictional objection constituted the full extent of the Government's participation in Board proceedings.*fn14 The Board went on to assess a $1,667,000 fine against Chamberlain.
Following the Board's decision, the United States filed a complaint in the federal district court, seeking an injunction to prevent the Department's enforcement and collection of the fine levied against Chamberlain.*fn15 The parties stipulated to the relevant facts,*fn16 and the case was heard upon a motion for summary judgment brought by the Board.
Aware of the dismissals and stipulations affecting the other defendants,*fn17 the district court considered the United States' claim of immunity solely as it related to Chamberlain. The court did not confine itself to the ratio decidendi found in the Board's decision, as it was not sitting as a court reviewing Board determinations. Rather, the district court focused on the facilities contracts pursuant to which Chamberlain contracted to operate the Scranton Army Ammunition Plan.*fn18 As noted "the two contracts... denominate Chamberlain 'an independent contractor and not an agency of the Government' and employ language fully consistent with that characterization." 431 F. Supp. at 754. The question before the district court thus became whether Chamberlain, which concededly operated the plant and indeed was named as an "independent contractor" in all relevant documents to which it was a party and which were pertinent to its function as Plant operator, was nonetheless a United States "department, agency, or instrumentality" within the meaning and terms of section 313. If so, then upholding the Government's sovereign immunity contention would result both in the district court being the exclusive forum for any action instituted against Chamberlain and in the disallowance of any fine. See n.20 infra. If not, i.e., if Chamberlain was not a federal entity under section 313, then Chamberlain, like any other private company, was subject to the jurisdiction of, and sanctions imposed by, the Board.
The district court, after an examination of policy considerations and relevant authorities, particularly Powell v. United States Cartridge Company,*fn19 concluded that as a matter of federal law Chamberlain was not shielded from state environmental proceedings merely because it was operating under a contract made with the federal government. The district court reasoned:
To include Chamberlain, an independent contractor, within [the] definition [of "department, agency, or instrumentality"] would not only strain the literal language, but would, by extending a partial shield to the vast number of companies which do business under contract with the Government, flout the environmental concerns which gave impetus to the Air and Water Acts. Those statutes, rather than erecting new obstacles to enforcement, exposed to suit in a specific forum the otherwise immune activities of strictly governmental activities.
431 F. Supp. at 755. The district court therefore refused to enjoin the Board's order prescribing a penalty against Chamberlain. Id.
We agree with the district court that Chamberlain is not a federal "department, agency, or instrumentality" under section 313 of the Act.*fn20
We find it critical that Chamberlain's contract with the federal government specifies that it is "an independent contractor and not an agency of the Government," and that its employees are not government employees.*fn21 By contrast, the pollution control requirements prescribed in section 313 apply to a federal "department, agency or instrumentality." This statutory terminology seems logically to exclude an independent contractor. If there is an ambiguity in the terms of the statute, however, that ambiguity disappears when reference is made to the explicit contractual language of the parties which carefully denotes Chamberlain to be an independent contractor and "not an agency of the Government."
Admittedly, contract provisions do not necessarily govern a party's legal status vis-a-vis third parties (here the Board). Yet here the language of the contracting parties is unmistakeably clear, and in our opinion was specifically intended to establish the status of the one in relation to the other. In the context of this case, in which the Government would have Chamberlain cloak itself with the mantle of a federal "department, agency or instrumentality" and thereby gain governmental immunity with respect to third parties, the relevant contract terms assume an enhanced significance.
Indeed, in a highly analogous context the Supreme Court found nearly-identical contract language to be "persuasive" and virtually determinative of the issue before it. In Powell v. United States Cartridge Co., 339 U.S. 497, 505-06, 94 L. Ed. 1017, 70 S. Ct. 755 (1950), a private company under contract with the United States claimed that it was a Government agent, and that its employees were Government employees, thereby exempting the employees from the minimum wage and maximum hour provisions of the Fair Labor Standards Act as amended, 29 U.S.C. §§ 201 et seq. In Powell, as here, the private company was a munitions manufacturer which operated a plant owned by the United States. There as here, the company's work was directed toward producing ammunition solely for the Government, a process whereby the end product as well as the raw materials were owned by the Government. There as here, the relevant contract between the Government and the company designated the company as an independent contractor and not a Government agent. There, as here, the contractor claimed to be shielded from a statute which affected and sought to regulate aspects of health and welfare. Finally, ...