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State, Dep't of Environmental Protection v. IGI

June 5, 2007


On appeal from a Final Order of the Department of Environmental Protection, Docket No. EHW04441-02S.

Per curiam.


Submitted May 16, 2007

Before Judges Lefelt and Parrillo.

An Administrative Law Judge (ALJ) conducted a hearing and sustained the Department of Environmental Protection's (DEP) Notice of Civil Administrative Penalty Assessment against IGI, Inc., finding that the company had violated nine hazardous waste regulations.*fn1 The ALJ nevertheless recommended reducing the proposed penalty from $215,000 to $34,000. The DEP Commissioner issued a final decision, which accepted the violation findings but rejected the ALJ's penalty recommendation, reinstituting the previously proposed penalty. IGI's appeal followed.

The ALJ applied N.J.A.C. 7:26G-2.4 and imposed the fixed specified base penalty for each violation which totaled $34,000. The ALJ declined to apply the matrix contained in N.J.A.C. 7:26G-2.5, which provides higher penalties for each violation than the base penalties, believing that the base penalty would provide a sufficient deterrent to IGI. The ALJ stated that "[i]f circumstances significantly change so there is virtually no chance of a violation reoccurrence then there is correspondingly no basis to impose an excessive penalty to serve as a deterrent for future violations because the new circumstances themselves create a remoteness for violations being repeated."

IGI argues that the ALJ correctly assessed the penalty because it is not the same company it was when the violations occurred. It acted promptly and efficiently to alleviate the violations and has taken appropriate steps to assure that these violations are not repeated.

IGI does not argue that specific errors were made in the manner in which DEP applied the matrix penalties. Instead, IGI argues that the DEP decision ignored the ALJ's findings after a lengthy trial, and therefore the agency decision was arbitrary and capricious. IGI contends that we should "re-impose" the ALJ's penalty.

The DEP, however, has discretion to assess penalties pursuant to the penalty matrix, and not the base penalties, which were applied by the ALJ, when the agency "determines that the penalty amount under N.J.A.C. 7:26G-2.4 would be too low to provide a sufficient deterrent effect as required by the Act." N.J.A.C. 7:26G-2.5(a)(1).

The DEP explained in its final decision that the ALJ properly considered the factors leading to his finding that there was "virtually no possibility of a reoccurrence of the violations." However, according to the DEP, the factors "do not entirely negate the need for a specific deterrent in this matter. The Initial Decision neglected to consider both the profit inuring to IGI's benefit by delaying a clean up of its hazardous waste, as well as the general industry-wide deterrent intended in the implementation of the hazardous waste regulations."

We cannot fault DEP's determination. The violations in this case existed for over twenty years and involved the storage of thousands of pounds of hazardous waste in 130 containers, some of which were in poor condition and leaking.

Although the Administrative Procedure Act has been amended to provide ALJs with greater decision making authority regarding lay witness credibility determinations, see L. 2001, c.5, § 4 (N.J.S.A. 52:14B-10), the regulatory agency retains "broad discretion in determining the sanctions to be imposed for a violation of the legislation it is charged with administering." In re Scioscia, 216 N.J. Super. 644, 660 (App. Div. 1987) (citing Knoble v. Waterfront Comm. of N.Y. Harbor, 67 N.J. 427 (1975)). "Consequently, such a sanction will be set aside on appeal only if it is arbitrary, capricious or unreasonable." Ibid. (citing Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980)).

The DEP carefully considered the findings and conclusions of the ALJ. It did not simply brush them aside and fail to deal with them in a serious manner. See State, Dep't of Health v. Tegnazian, 194 N.J. Super. 435, 450 (App. Div. 1984). Instead, the agency carefully recognized and explained the deficiencies in the initial decision that compelled a different penalty.

The agency's consideration of IGI's profit, for example, was completely appropriate. See United States v. Mun. Auth. of Union Twp., 929 F. Supp. 800, 806 (M.D. Pa. 1996), aff'd, 150 F.3d 259 (3d Cir. 1998). As we have said in the past, "[t]he penalty imposed must be large enough so as not to become the equivalent of a permit fee or a mere cost of doing business." State v. Lewis, 215 N.J. Super. 564, 576 (App. Div. 1987). The agency's consideration of general deterrence was also appropriate as any sanction must not only deter the polluter but must also ...

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