State ex rel. DeWine v. Osborne Co., Ltd. , 100 N.E.3d 1 ( 2017 )

[Cite as State ex rel. DeWine v. Osborne Co., Ltd., 2017-Ohio-8284.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
LAKE COUNTY, OHIO
STATE OF OHIO ex rel. : OPINION
MICHAEL DEWINE,
OHIO ATTORNEY GENERAL,
:
Plaintiff-Appellee, CASE NO. 2016-L-091
:
- vs -
:
OSBORNE CO., LTD., et al.,
:
Defendants-Appellants.
Civil Appeal from the Lake County Court of Common Pleas, Case No. 2014 CV 000166.
Judgment: Affirmed in part and reversed in part; remanded.
Mike DeWine, Ohio Attorney General; Gregg H. Bachmann, Nicole Candelora-Norman,
and Amy Factor, Assistant Attorneys General, State Office Tower, 30 East Broad
Street, 25th Floor, Columbus, OH 43215 (For Plaintiff-Appellee).
Richard N. Selby, II, Dworken & Bernstein Co., 60 South Park Place, Painesville, OH
44077 (For Defendants-Appellants).
TIMOTHY P. CANNON, J.
{¶1} Appellants, Osborne Co., Ltd. and the Executors of the Estate of Jerome
T. Osborne, appeal from an August 1, 2016 judgment of the Lake County Court of
Common Pleas. The trial court ordered appellants to pay a civil penalty for violating
Ohio Revised Code Chapter 6111 and ordered injunctive relief in favor of appellee,
State of Ohio ex rel. Michael DeWine, Ohio Attorney General. This judgment is affirmed
in part and reversed in part for the reasons that follow.
{¶2} On May 29, 2012, appellee filed a complaint, in Case No. 12 CV 001459,
against Defendants Jerome T. Osborne (“Mr. Osborne”) and Osborne, Inc. Appellee
subsequently filed an amended complaint, which substituted Osborne Co., Ltd.
(“Osborne Co.”) for Osborne, Inc. The trial court denied a motion for partial summary
judgment filed by appellee on January 17, 2014. On January 22, 2014, Osborne Co.
was voluntarily dismissed from Case No. 12 CV 001459, and appellee filed a complaint
against Osborne Co. in Case No. 14 CV 00166. The trial court consolidated the two
cases on January 30, 2014. On August 15, 2014, the trial court granted a motion to
substitute the Executors of Jerome T. Osborne’s Estate as defendants, following Mr.
Osborne’s death. The executors are identified as Richard M. Osborne, Sr.;
Georgeanne Osborne Gorman; Michael E. Osborne; Jacqueline Osborne Fisher;
William V. Krug; Jerome T. Osborne, III; William L. Mackey; and Jeremy Cash Osborne.
{¶3} The complaints against each appellant—Osborne Co. and Mr. Osborne’s
estate—set forth three causes of action, each alleging violations of Ohio’s Water
Pollution Control Laws as found in Revised Code Chapter 6111.
{¶4} Count One alleges appellants violated R.C. 6111.04(A) and R.C.
6111.07(A) by failing to obtain a certification from the Ohio Environmental Protection
Agency (“Ohio EPA”) under Section 401 of the Clean Water Act or a Section 404 permit
from the U.S. Army Corps of Engineers before engaging in certain activities within and
along the East Branch Chagrin River that resulted in “(1) the placement of dredged or fill
material and/or wastes into waters of the State; and (2) degradation of certain portions
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of the East Branch Chagrin River and the threatened degradation of other portions [of]
these waters of the state.”
{¶5} Count Two alleges appellants violated R.C. 6111.04(A) and R.C.
6111.07(A) by failing to obtain a construction storm water discharge permit before
engaging in construction activities that resulted in “disturbing one or more acres of land
within and along two miles of stream channel of the East Branch Chagrin River.”
{¶6} Count Three alleges appellants violated R.C. 6111.04(A) and R.C.
6111.07(A) because they polluted the East Branch Chagrin River, without a permit, by
discharging storm water from land within and along two miles of stream channel of the
East Branch Chagrin River, and thereby created a public nuisance.
{¶7} The parties submitted a joint stipulation of facts with regard to many
issues in the case. With regard to remaining disputed facts, the matter ultimately
proceeded to a bench trial in January 2016.
{¶8} This case arose after an employee of the Ohio EPA observed William
Franz, an employee of Osborne Co., operating a track hoe in the middle of the East
Branch Chagrin River. In his deposition, Mr. Franz testified that he was removing silt so
the river would flow. The parties stipulated that Mr. Osborne instructed Mr. Franz to use
the track hoe to remove sand and gravel from the stream bed and relocate this material
along the edge of the stream, on the stream banks, and in the middle of the river. The
parties also stipulated that, on certain occasions when the track hoe’s bucket could not
reach the river bank, Mr. Franz would place piles in the river, then relocate the track hoe
and move those piles to the bank of the river. Another stipulation was that Mr. Osborne
personally observed some of Mr. Franz’s work and that he would usually call Mr. Franz
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the night before or first thing in the morning and tell him what project to work on each
day and what to do for the project. After work was completed, Mr. Osborne would
usually call Mr. Franz to ask how the work for the day went.
{¶9} The parties stipulated that appellants were performing the work on the
river pursuant to agreements with the Village of Kirtland Hills, reached in 1983 and
1990, to maintain the river banks. In exchange for the work performed on the river, Mr.
Osborne was allowed to farm certain property owned by the Village of Kirtland Hills.
The work was done throughout the years from River Mile 4.30 to River Mile 6.15.1 Most
of the work performed in or near the river was on property owned either by the Village of
Kirtland Hills or Mr. Osborne.
{¶10} The parties stipulated that the East Branch Chagrin River is a “water of the
state,” as that term is defined in R.C. 6111.01; that it was designated as a State Scenic
River by the Ohio Department of Natural Resources (“ODNR”) on July 2, 1979; that it is
designated as an Outstanding State Water for Ecological Value; and that its beneficial
use designations are cold water habitat,2 seasonal salmonid habitat, primary contact
recreation, and agricultural/industrial water supply.
{¶11} The parties stipulated that Mr. Franz, at the direction of Mr. Osborne,
operated the track hoe in the river on 24 separate occasions from 2001 through 2007.
Each of these occasions involved dredging the river and placing dredged material along
the river bank or in the middle of the river. Evidence was introduced at trial that the
1. Testimony at trial explained that a “river mile” is similar to a mile marker on a highway. Here, it is
measured by the distance from Lake Erie (R.M. 0) to the source of the river. R.M. 6.15 is upstream of
R.M. 4.30 and is just upstream of St. Hubert’s Church, located at 8870 Baldwin Road, Village of Kirtland
Hills, Ohio. R.M. 4.30 is near the western boundary of property owned by the Village of Kirtland Hills.
2. Testimony at trial explained that cold water streams in Ohio are generally small, with small drainage
systems. A cold water stream such as the East Branch Chagrin River is unique due to its size. It
provides a large cold water habitat the State of Ohio seeks to preserve.
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dredged material formed nine piles, anywhere from eight- to twenty-feet high, for
extended distances along the river bank. At least 25,656 cubic yards of river bottom
were dredged. Most of the dredged material was piled on property owned by either the
Village of Kirtland Hills or Mr. Osborne. One pile, referred to as “the Oliva pile,” was
located on private property near St. Hubert’s church.
{¶12} According to trial testimony, the river had been excavated down to the
bedrock in many areas between R.M. 4.30 and R.M. 6.15, which resulted in the river
losing access to its floodplain and caused significant bank erosion. The state also
introduced testimony that appellants’ activities resulted in a loss or degradation of the
habitat for fish and macro invertebrates.
{¶13} Paul Anderson, an environmental specialist in the surface water division of
the Ohio EPA, became aware of the work being done in the river on July 13, 2007, at
which time it ordered appellants to cease work in the river. Appellants complied. The
Ohio EPA immediately performed a site survey and concluded the site was severely
impacted by substrate removal and reworking and by placement of removed material in
the floodplain and bankfull area:3 the habitat was severely simplified, siltation was high,
and erosion was potentially high.
{¶14} The U.S. Army Corps of Engineers thoroughly inspected the river one
week later. The parties stipulated that Mr. Osborne received a letter from the Corps in
August 2007, stating the work in the river was an unauthorized activity and in violation
of the Federal Clean Water Act. The letter stated, in part:
3. Testimony at trial explained that the “bankfull area” is the portion of the stream channel that is large
enough to contain the stream under most flow conditions. This area is either bare or has aquatic and
annual vegetation; perennial vegetation cannot grow there because its roots are too wet or its seedlings
get swept away. The floodplain lies above the bankfull area.
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The inspection found that gravel and natural stone were
excessively dredged from the stream at several locations, and
disposed or stockpiled in the floodway and below the ordinary high
water elevation, and also in the stream channel. No Department of
the Army authorization was issued for this activity. Therefore, this
work is an unauthorized activity and in violation of the Clean Water
Act.
The letter directed Mr. Osborne not to perform any additional activities in the river and
advised that any further work would be considered a knowing and willful violation of
federal law, subjecting him to civil penalties.
{¶15} The parties stipulated that Mr. Osborne also received a notice of violation
from the Ohio EPA in August 2007, alleging violations of Ohio Revised Code Chapter
6111. The notice also alleged violations of O.A.C. 3745-1-04. This notice stated, in
part:
The illegal activity began upstream of St. Hubert’s Church on the
East Branch of the Chagrin River and continued downstream
approximately 8,700 feet. The inspection team observed that
materials had been and were being side cast from the river bed
onto various sections of the river bank. This activity constitutes a
violation of [R.C.] 6111.04, which prohibits any person from causing
pollution to any waters of the State without a valid unexpired permit
issued by the Director of Ohio EPA. [R.C.] 6111.07 states that no
person shall violate or fail to perform any duty imposed by rules
adopted by Ohio EPA. The activities observed caused violations of
[O.A.C.] 3745-1-04, which contains criteria applicable to all waters
of the State. Please be advised that failure to comply with the
above laws may be cause for enforcement action pursuant to [R.C.]
Section 6111 and subject you to civil penalties identified in [R.C.]
6111.09(A).
Please inform this office in writing, within ten days of receipt of this
notification, of the description of the action(s) proposed to address
these violations. Please provide all documentation associated with
this activity including the intent of the activity, contracts with others
to perform the activity, and a record of when this activity had been
previously performed.
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{¶16} Mr. Osborne responded by letter, through his attorney, on September 10,
2007. Mr. Osborne noted he began utilizing the land located in Kirtland Hills pursuant to
an oral agreement in the late 1970s; this oral agreement was confirmed by written
agreements in 1983 and 1990. Pursuant to these agreements, Mr. Osborne undertook
erosion control and bank stabilization measures on the property on an intermittent
basis. He indicated there were no records or documentation associated with said
erosion control and bank stabilization measures. The letter ended by stating, “Mr.
Osborne proposes no actions at this time to address the alleged violations” and that
nothing in the letter shall be deemed an admission as to any unlawful activities; “in fact,
for the record, Mr. Osborne denies any unlawful activities[.]”
{¶17} On November 1, 2007, Randall Keitz, a floodplain engineer with ODNR,
surveyed the disturbed area of the river. He testified that he concluded, as a result of
this survey, that the river was highly unstable with considerable ongoing erosion of the
river banks due to the limited channel width and increased velocity of the water. Trees
along the banks were being undermined, and access to the floodplain was very limited.
{¶18} On November 2, 2007, the U.S. Army Corps of Engineers sent a letter to
the director of the Ohio EPA, noting the work was done without authorization and in
violation of the Clean Water Act. It authorized the Ohio EPA to immediately begin
remedial and restoration measures without needing to obtain any further approval or
permits from the Corps.
{¶19} Over the next two years, the Ohio EPA met with appellants and the Village
of Kirtland Hills to negotiate remediation of the river. On April 29, 2009, the Ohio EPA
provided a proposed draft of a settlement, titled “Director’s Final Findings and Orders,”
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to appellants in an attempt to administratively settle the violations of R.C. Chapter 6111.
The draft states, in Paragraph 3 of the Findings, that appellants altered approximately
two miles of the stream channel in violation of R.C. Chapter 6111 and the Clean Water
Act by dredging from and depositing fill material in the river. Paragraph 8 states that
constriction of the floodplain remains a significant concern; lowering of the stream
channel elevation and stockpiling of material along the stream banks significantly limits
the amount of energy dissipation that can occur during flood events. Paragraphs 9 and
10 state that placement of dredged substrates directly upon the stream bank has
increased the risk of flood damage, and lowering of the channel bed has caused bank
erosion problems. Paragraph 11 states the river is not meeting certain biocriteria
outlined in O.A.C. 3745-1-07 due to habitat modification and disturbance.
{¶20} The draft then outlines several Orders directing appellants to implement a
plan designed to fully remediate the river. It states that “[t]he Plan shall focus on
facilitating the natural recovery of the river. Where appropriate, the plan may include
replacement of the stockpiled substrates within the stream channel to provide enhanced
habitat, to expedite the stream channel recovery process or to stabilize streambanks at
specified locations.”
{¶21} A section of the draft, titled “Reservation of Rights,” provides, in part:
Ohio EPA reserves the right to take any action, including but not
limited to any enforcement action for civil or administrative penalties
against Respondent for violations specifically cited in these Orders,
action to recover costs, or action to recover damages to natural
resources, action to compel further remediation pursuant to any
available legal authority as a result of past, present, or future
violations of state or federal laws or regulations or the common law,
and/or as a result of events or conditions arising from, or related to,
the Site. Upon termination pursuant to the Termination Section of
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these Orders, Respondent shall have resolved their liability to Ohio
EPA only for the Work performed pursuant to these Orders.
{¶22} Larry Reeder, enforcement supervisor of the surface water division at the
Ohio EPA, testified that it did not intend to pursue a civil penalty against appellants at
the time they were negotiating. Cynthia Paschke also testified regarding these
negotiations. Ms. Paschke was qualified as an expert witness, limited to the collection
and analysis of habitat data in the river, and she also represented appellants during
their negotiations with the Ohio EPA. Ms. Paschke testified that appellants were
prepared to move forward with the negotiated restoration project had the Ohio EPA
waived its reservation of rights regarding future administrative and civil penalties, as it
had done with the Village of Kirtland Hills. The Ohio EPA did not waive its reservation
of rights, and Mr. Reeder testified he was notified in May 2009 that appellants would not
sign the draft agreement and would not move forward with the restoration project. As a
result, on June 25, 2009, the director of the Ohio EPA requested in writing that the Ohio
Attorney General initiate civil proceedings against appellants.
{¶23} On July 27, 2009, the Village of Kirtland Hills signed a settlement
agreement with the Ohio EPA (i.e., the final version of the Director’s Final Findings and
Orders). The village agreed, in part, to do the following: (1) remove the piles placed on
the floodplain and redistribute the material into and along the river channel; (2) develop
a plan to construct bank stabilization where appropriate to reduce bank erosion and
stress; (3) develop a plan to re-vegetate exposed areas following excavation and
construction activities; (4) develop a plan for storm water pollution prevention; (5)
provide a schedule for implementing the plans and submitting reports to the Ohio EPA;
(6) submit a plan to monitor river channel morphology, habitat quality, and biological
9
water quality; and (7) submit a plan for the creation of a riparian buffer along the river
that provides for permanent protection through a conservation easement or
environmental covenant. The “Reservation of Rights” section of this agreement,
Section XI, simply provided that the “Ohio EPA and Respondent each reserve all rights,
privileges and causes of action, except as specifically waived in Section XI of these
Orders.” Mr. Reeder testified that the Ohio EPA was not seeking a financial penalty
against the Village of Kirtland Hills.
{¶24} The Village of Kirtland Hills hired Oxbow River and Stream Restoration,
Inc. (“Oxbow”) to perform the remedial work in the river. In January 2011, Oxbow
developed a storm water pollution prevention plan, a stream restoration plan, and a
stream restoration project summary of work. The remediation work outlined in the
settlement agreement was largely completed by November 2013. Oxbow had
redistributed approximately 25,000 cubic yards of previously dredged material into
approximately 5,260 linear feet of active channel; stabilized approximately 1,240 feet of
stream bank; and planted native grasses, sedges, shrubs, and trees on approximately
11.5 acres of land. Mr. Anderson testified that the river bed had been raised one to two
feet in most locations, which improved access to the floodplain. The Oliva pile,
however, was not removed and redistributed; apparently, the Village of Kirtland Hills
refused to authorize work on property not under its control.
{¶25} William Zawiski, a water quality supervisor with the Ohio EPA, testified
that he conducted a habitat evaluation on November 19, 2013. The restoration work
had improved the habitat, but the river still needed more cover and pools; the river had
not fully recovered from the unauthorized activities.
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{¶26} Mr. Keitz testified that he conducted a stream channel classification
survey in December 2013. The river remained moderately entrenched and could barely
reach its floodplain; the river remained highly unstable with no bank protection. He
recommended planting trees and other vegetation to stabilize the banks and further
raising the bed, by adding rocks and other material, to slow river velocity and create
habitats.
{¶27} The parties submitted post-trial briefs at the conclusion of the bench trial.
Appellants repeated the defenses they had raised at various stages throughout the
case. First, appellants argued the statutory framework under which the complaint was
brought (R.C. 6111.04 & R.C. 6111.07) does not prohibit dredging; thus, the only
alleged violations at issue relate to the unauthorized discharge of dredged materials into
the river. Second, appellants argued the statutes at issue do not require one to obtain a
permit; rather, obtaining a permit “provides a safe harbor, whereby individuals or
companies who obtain a permit are exempted from these pollution laws.” With regard to
the imposition of a civil penalty, appellants argued the State had mischaracterized its
failure to perform any remediation on the river as a result of recalcitrance, instead of
recognizing it as a result of the Ohio EPA’s refusal to waive civil penalties.
{¶28} On August 1, 2016, the trial court found in favor of the State of Ohio on all
three counts.
{¶29} Regarding Count One—which alleged that defendants violated R.C.
6111.04(A) and R.C. 6111.07(A) by failing to obtain Section 401 and Section 404
permits prior to commencing work in the river—the trial court found appellants’ activities
along the East Branch Chagrin River resulted in the placement of dredged material in
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the river in excess of one cubic yard, thus triggering the requirement to obtain the
permits.
{¶30} Regarding Count Two—which alleged appellants violated R.C. 6111.04(A)
and R.C. 6111.07(A) by failing to obtain a construction storm water discharge permit
before engaging in construction activities—the trial court found the State had shown that
appellants disturbed one or more acres of land along the East Branch Chagrin River,
thus triggering the requirement to obtain the permit. The trial court stated appellants’
claim that the permitting process merely provides a safe harbor exemption from Ohio’s
water pollution laws has no basis in law.
{¶31} Regarding Count Three—which alleged that appellants violated R.C.
6111.04(A) and R.C. 6111.07(A) because they polluted the river by discharging storm
water from land within and along two miles of stream channel of the river—the trial court
stated it was closely related to Counts One and Two and, “[a]pplying the factors and
analysis applied in count two,” it found in favor of the State.
{¶32} The trial court found that Mr. Osborne was subject to personal liability on
all three counts and therefore held his Estate jointly and severally liable along with
Osborne Co.
{¶33} The trial court found that significant harm to the river environment was
caused by appellants’ dredging; appellants were aware of the requirement to at least
obtain a National Pollutant Discharge Elimination System permit, but failed to do so;
appellants avoided the costs of various permits and obtained an economic benefit from
farming the land owned by the Village of Kirtland Hills; and the State incurred
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extraordinary enforcement costs. As a result, the trial court imposed a civil penalty of
$404,240.00, plus post-judgment statutory interest.
This amount consists of $180,000 for 24 days of active dredging of
the East Branch Chagrin River with each day being assessed a
$7,500 penalty. This amount also includes $184,080 for creating a
public nuisance by leaving spoil piles along the river from July 13,
2007 to November 1, 2013 (the date the Village of Kirtland Hills
completed its portion of remediation) for a total of 2,301 days at $80
per day and an additional $40,160 for creating a public nuisance by
allowing the remaining spoil pile to exist from November 2, 2013 to
the present (July 29, 2016) for a total of 1,004 days at $40 per day.
{¶34} The trial court also ordered extensive injunctive relief, as follows:
(A) Defendants are permanently enjoined from discharging any
pollution, other wastes, and dredge and fill material to waters of
the State on or from the banks of the East Branch Chagrin River
except in compliance with Chapter 6111 and any necessary
permits and/or Section 401 certifications issued pursuant to
Chapter 6111 and the rules adopted thereunder;
(B) Defendants shall submit a plan to the Ohio EPA to redistribute
and/or remove the remaining pile in the East Branch Chagrin
River within ninety days from the date of this judgment entry;
(C) Defendants shall implement and execute the approved
redistribution and/or removal plan;
(D) Defendants shall submit a monitoring plan to characterize the
current channel morphology, habitat quality, and biological
water quality in the East Branch Chagrin River within ninety
days from the date of this judgment entry;
(E) Defendants shall implement and execute the approved
monitoring plan;
(F) Defendants shall submit a plan for the creation of a riparian
buffer along the East Branch Chagrin River to bar construction
activities and stream channel modifications except as
authorized by the Ohio EPA within one hundred and twenty
(120) days from the date of this judgment entry;
(G) Defendants shall implement and execute the approved riparian
buffer plan; and
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(H) Defendants shall submit a post-construction report to the Ohio
EPA after completion of the remediation work and creation of
the riparian buffer.
{¶35} Appellants filed a timely notice of appeal from the trial court’s judgment
entry and assert four assignments of error for our review. Their first assignment of error
states:
{¶36} “The trial court erred in interpreting the state of Ohio’s statutory claims to
encompass all work performed in the East Branch Chagrin River without a permit, as
opposed to limiting the state of Ohio’s claims to the discharge of dredged materials into
the East Branch/Chagrin River.”
{¶37} All three counts alleged in the complaint are premised on violations of the
Water Pollution Control Act, found in Revised Code Chapter 6111. Appellants first
assert that the deposit of dredged materials into the East Branch Chagrin River, rather
than the excavation of material out of the river, is the only conduct the trial court should
have considered in determining whether appellants violated the relevant statutes. They
also argue the trial court improperly relied on federal permit requirements to find liability
under state statutes.
{¶38} Issues of statutory interpretation are questions of law, which we review de
novo. Riedel v. Consol. Rail Corp., 125 Ohio St.3d 358, 2010-Ohio-1926, ¶6 (citations
omitted).
{¶39} The Water Pollution Control Act provides that “[n]o person shall violate or
fail to perform any duty imposed by sections 6111.01 to 6111.08 of the Revised Code or
violate any order, rule, or term or condition of a permit issued or adopted by the director
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of environmental protection pursuant to those sections. Each day of violation is a
separate offense.” R.C. 6111.07(A) (emphasis added).
{¶40} Appellants are charged with violating R.C. 6111.04(A), which provides that
“[n]o person shall cause pollution or place or cause to be placed any sewage, sludge,
sludge materials, industrial waste, or other wastes in a location where they cause
pollution of any waters of the state.” “Pollution” is defined as “the placing of any
sewage, sludge, sludge materials, industrial waste, or other wastes in any waters of the
state.” R.C. 6111.01(A). “Other wastes” is defined as “garbage, refuse, decayed wood,
sawdust, shavings, bark, and other wood debris, lime, sand, ashes, offal, night soil, oil,
tar, coal dust, dredged or fill material, or silt, other substances that are not sewage,
sludge, sludge materials, or industrial waste, and any other ‘pollutants’ or ‘toxic
pollutants’ as defined in the Federal Water Pollution Control Act that are not sewage,
sludge, sludge materials, or industrial waste.” R.C. 6111.01(D) (emphasis added).
“Dredged material” means “material that is excavated or dredged from waters of the
state.” O.A.C. 3745-32-01(H) (formerly (E)). At the time appellants conducted their
activity in the river, “discharge of dredged material” was recognized only when it was in
excess of one cubic yard in a single or incidental operation. See former O.A.C. 3745-
32-01(C).
{¶41} Pursuant to R.C. 6111.04(A), any such action is declared to be a public
nuisance, except in cases where the director of environmental protection has issued a
valid and unexpired permit or renewal thereof, as provided in R.C. 6111.01 to R.C.
6111.08. Although these sections authorize the director to issue permits in certain
circumstances, none of them require a permit be obtained.
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{¶42} While it may have been a violation of other statutory provisions, we agree
with appellants that it was not a violation of the statutes alleged in the complaint to
dredge the East Branch Chagrin River, nor was it a violation of these statutes to fail to
obtain permits. As pled, and under the facts of this case, appellants are only potentially
liable under R.C. 6111.04(A) for the discharge of dredged material into the river or any
other actions constituting pollution as defined above. Obtaining permits for such
discharge would have provided appellants with an affirmative defense to these charges.
The complaint filed by the State apparently anticipated appellants’ inability to raise this
affirmative defense and, in so doing, alleged the same violation in three separate
counts. While the State alleges in the complaint a failure to obtain necessary permits, it
is clear that the only violation of law properly alleged is the unauthorized pollution of the
waters of the state based on R.C. 6111.04(A).
{¶43} The State responds that appellants’ plan from the beginning was to alter
the river by controlling erosion and stabilizing the banks, which in isolation would be a
violation of federal and state law if done without a permit. Appellants may well have
violated other federal and state laws. See, e.g., R.C. 3767.13(C) (“No person shall
unlawfully obstruct or impede the passage of a navigable river, harbor, or collection of
water, or corrupt or render unwholesome or impure, a watercourse, stream, or water, or
unlawfully divert such watercourse from its natural course or state to the injury or
prejudice of others.”); see also 33 U.S.C. 1344(f)(2) (“Any discharge of dredged or fill
material into the navigable waters incidental to any activity having as its purpose
bringing an area of the navigable waters into a use to which it was not previously
subject, where the flow or circulation of navigable waters may be impaired or the reach
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of such waters be reduced, shall be required to have a permit under this section.”).
However, the State did not allege violations of any other laws in the complaint.
{¶44} The trial court erred to the extent it found appellants liable for activity
outside the scope of R.C. 6111.04(A) and R.C. 6111.07(A). Appellants’ argument that
violations of these sections are the only properly alleged violations is well taken.
{¶45} Appellants further assert that the only conduct the trial court should have
considered as a violation of R.C. 6111.04(A) is the discharge of dredged materials into
the water of the river, not the dredged materials deposited on the river banks.
Appellants contend the trial court erred in making a determination that the “waters of the
state,” as defined in Chapter 6111, includes all areas below the “ordinary high water
mark.” Appellants argue the concept of utilizing the “ordinary high water mark” to define
the “waters of the state,” thereby including dry land within the “waters of the state,” is
not supported by statutory or case law. This is, again, a statutory interpretation issue
we review de novo. Reidel, supra, at ¶6.
{¶46} R.C. 6111.01(H) defines “waters of the state” as follows:
[A]ll streams, lakes, ponds, marshes, watercourses, waterways,
wells, springs, irrigation systems, drainage systems, and other
bodies or accumulations of water, surface and underground, natural
or artificial, regardless of the depth of the strata in which
underground water is located, that are situated wholly or partly
within, or border upon, this state, or are within its jurisdiction,
except those private waters that do not combine or effect a junction
with natural surface or underground waters.
{¶47} The concept of the “ordinary high water mark” was introduced at trial by
Edward Wilk, a Section 401 coordinator at the Ohio EPA. Mr. Wilk testified that in
determining its jurisdiction, the Ohio EPA utilizes a December 7, 2005 Regulatory
Guidance Letter from the U.S. Army Corps of Engineers. The Letter provides that, for
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purposes of Section 404 of the Clean Water Act, the lateral limits of jurisdiction over
non-tidal water bodies, in the absence of adjacent wetlands, extend to the “ordinary high
water mark.” Corps regulations define the term at 33 C.F.R. 328.3(c)(6) (formerly (e)),
which states:
The term ordinary high water mark means that line on the shore
established by the fluctuations of water and indicated by physical
characteristics such as a clear, natural line impressed on the bank,
shelving, changes in the character of soil, destruction of terrestrial
vegetation, the presence of litter and debris, or other appropriate
means that consider the characteristics of the surrounding areas.
{¶48} We are not aware of any case law that holds the area over which the U.S.
Army Corps of Engineers has jurisdiction is synonymous with the term “waters of the
state” as used in R.C. 6111.04(A). Nor are we aware of any case law interjecting the
concept of an ordinary high water mark into the definition of what constitutes “waters of
the state.” We agree with the State, however, that to accept appellants’ argument
would be to ignore the purpose of Ohio’s Water Pollution Control Act and the problems
it intends to remedy. See, e.g., State v. Conley, 147 Ohio St. 351, 353 (1947) (“It is
fundamental in the construction and application of statutes that not only the purpose to
be served, but the object to be attained as well as the evil to be remedied, should be
considered.”). It defies all sense to conclude that the discharge of pollutants into a
portion of a river that is fortuitously dry at the time of such discharge, but is at other
times filled with water, falls outside the rubric of Ohio’s Water Pollution Control Act.
{¶49} Further, in determining whether appellants violated R.C. 6111.04(A), it is
not necessary to define “waters of the state” in such a way that it equates to or includes
the “ordinary high water mark.” Again, R.C. 6111.04(A) provides that “[n]o person shall
cause pollution or place or cause to be placed any sewage, sludge, sludge materials,
18
industrial waste, or other wastes in a location where they cause pollution of any waters
of the state.” (Emphasis added.) “Pollution” is defined, in relevant part, as “the placing
of * * * other wastes [including dredged material] in any waters of the state.” R.C.
6111.01(A)&(D).
{¶50} Thus, pollution, in violation of R.C. 6111.04(A), can occur either directly or
indirectly. A direct violation occurs by placing dredged material in a water of the state.
An indirect violation occurs by placing, or causing to be placed, dredged material in a
location where it then causes pollution of a water of the state.
{¶51} Here, there is evidence that appellants directly caused pollution by placing
dredged materials in the river, which is a water of the state. There is also evidence that
appellants indirectly caused pollution by placing dredged materials in a location that
resulted in some of that material ending up in the river, in excess of one cubic yard,
either due to storm water runoff or due to the river rising up to the location. It is
irrelevant, under the terms of the statute, whether that location of placement is above or
below any ordinary high water mark.
{¶52} Appellants’ argument that the trial court should not have considered the
depositing of dredged materials on the river banks is not well taken.
{¶53} Appellants’ first assignment of error is with merit to the extent indicated.
We have no question, as previously discussed, that there were violations of numerous
statutory and administrative regulations. For whatever reason, however, the State did
not charge appellants with violations of those provisions. Appellants proceeded to trial
defending the allegations in the complaint. It would be unfair to require them to defend
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against violations alleged in letters and administrative orders that were not contained in
the complaint filed with the trial court.
{¶54} Appellants’ second and third assignments of error state:
[2.] The trial court erred in assessing a civil penalty against
defendants in the amount of $404,200.00.
[3.] The trial court erred in awarding injunctive relief beyond the
scope necessary to address the current effects of dredged
materials into the East Branch/Chagrin River, as opposed to, any
impact of the overall work performed in the river without a permit.
{¶55} Based on our disposition of the first assignment of error, we must remand
this matter to the trial court to make a finding specifically related to the violations alleged
in the complaint, to wit: discharge of materials into the East Branch Chagrin River, as
provided in R.C. 6111.04(A), and thereafter limit any civil penalty to the consequences
of that conduct and to fashion an order of injunctive relief that addresses only the
violations of R.C. 6111.04(A) as alleged in the complaint.
{¶56} Appellants’ fourth assignment of error states:
{¶57} “The trial court erred in finding the Estate of Jerome T. Osborne personally
liable.”
{¶58} Appellants contend in order to find Mr. Osborne personally liable, the
State must “pierce the corporate veil.” They assert there was no evidence Mr. Osborne
conducted any of the unauthorized activity in his personal, rather than corporate,
capacity.
{¶59} The State responds that Ohio law is clear that individuals may be held
liable when a court finds “personal participation” in the unlawful act and that it is not
necessary to pierce the corporate veil. The State did not allege in its complaint that Mr.
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Osborne was responsible as an officer or owner of Osborne Co. It alleged that Mr.
Osborne, individually, violated R.C. 6111.04(A) and R.C. 6111.07(A). The State
contends the plain language of the statute establishes the personal liability of Mr.
Osborne. Appellants argue in response that the State’s “personal participation” theory
is an attempt to expand its enforcement powers beyond its statutory authority.
{¶60} R.C. 6111.04(A)(1) provides that “no person shall cause” a violation of the
statute. R.C. 6111.07(A) provides that “no person shall violate or fail to perform any
duty” under R.C. 6111.01 to R.C. 6111.08. In the definitions related to this chapter, at
R.C. 6111.01(I), the term “person” includes all those set forth in the definition found at
R.C. 1.59(C), which defines “person” as including “an individual, corporation, business
trust, estate, trust, partnership, and association.”
{¶61} The parties stipulated that Osborne Co. is a corporation that has been
incorporated under the laws of the state of Ohio since 1956 and is currently in good
standing with the Ohio Secretary of State. Mr. Osborne was an owner and officer of
Osborne Co.
{¶62} “A corporation is an artificial person, created by the General Assembly and
deriving its power, authority and capacity from the statutes. * * * A corporate officer or
shareholder normally will not be held liable for the debts or acts of the corporate entity.”
Mohme v. Deaton, 12th Dist. Warren No. CA2005-12-133, 2006-Ohio-7042, ¶7, citing
Worthington City School Dist. Bd. of Educ. v. Franklin Cty. Bd. of Revision, 85 Ohio
St.3d 156, 160 (1999) (citation omitted). “An exception to shareholder liability exists
where, ‘upon piercing the corporate veil,’ it appears that a corporation is simply the ‘alter
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ego’ of the individual sought to be held liable.” Id. at ¶8, quoting Inserra v. J.E.M. Bldg.
Corp., 9th Dist. Medina No. 2973-M, 2000 WL 1729480, *4 (Nov. 22, 2000).
{¶63} “In addition, a corporate officer can be held personally liable for tortious
acts he or she has committed and, under such circumstances, a plaintiff need not pierce
the corporate veil to hold individuals liable who have personally committed such acts.”
Id. at ¶9 (citations omitted). This has become known as the “personal participation”
theory and has been applied to environmental law violations. See, e.g., State ex rel.
DeWine v. Sugar, 7th Dist. Jefferson Nos. 14 JE 0004 & 14 JE 0006, 2016-Ohio-884,
¶35 (citation omitted); State ex rel. DeWine v. Marietta Indus. Enters., Inc., 4th Dist.
Washington No. 15CA33, 2016-Ohio-7850, ¶25.
{¶64} “A corporate officer, however, ‘may not be held liable merely by virtue of
his status as a corporate officer.’” Roberts v. RMB Ents., Inc., 197 Ohio App.3d 435,
2011-Ohio-6223, ¶35 (12th Dist.), quoting Mohme, supra, at ¶28. Rather, the evidence
presented must indicate that the officer specifically directed the particular act to be done
or that the officer participated or cooperated therein. Id., citing Young v. Featherstone
Motors, Inc., 97 Ohio App. 158, 171 (1954); see also Marietta, supra, at ¶25 (citations
omitted).
{¶65} The parties stipulated that Mr. Franz was employed by Mr. Osborne
through Osborne Co. since 1991. It was also stipulated that Mr. Osborne directed Mr.
Franz to remove material from the stream bed and place it along the edge of the river,
on the river banks, and in the middle of the river and that Mr. Osborne personally
observed some of this work. The parties further stipulated that Mr. Osborne usually
called Mr. Franz the night before or first thing in the morning to instruct him what project
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to work on each day and what to do for each project, and that Mr. Osborne would
usually call Mr. Franz at night to see how the work for the day went. Notably, the
stipulations also include the following:
Defendants performed the work on the East Branch Chagrin River
pursuant to April 1983 and June 1990 Agreements with the Village
of Kirtland Hills to maintain the river banks. * * * In exchange for
the work performed on the East Branch Chagrin River pursuant to
the April 19, 1983 Agreement, Defendant Jerome T. Osborne was
allowed to farm certain property owned by the Village of Kirtland
Hills. [Emphasis added.]
{¶66} Thus, there is evidence that a personal benefit was conferred on Mr.
Osborne and that he acted independent of the corporation, at least to some degree.
The record does not contain any evidence that he was acting, at all times material, only
in his corporate capacity. The State alleged Mr. Osborne personally violated the
statute. The fact that he may have been acting in his corporate capacity is a defense to
that claim—a defense that was not established in the record.
{¶67} In light of the stipulations and evidence presented, we agree that Mr.
Osborne’s personal participation in the violations has been established by a
preponderance of the evidence. The trial court did not err in finding Mr. Osborne’s
Estate jointly and severally liable along with Osborne Co.
{¶68} Appellants’ fourth assignment of error is without merit.
{¶69} The judgment of the Lake County Court of Common Pleas is affirmed with
regard to holding appellants jointly and severally liable. The judgment is reversed with
regard to the finding of liability for activity outside the scope of R.C. 6111.04(A). This
matter is remanded for the trial court to make a finding specifically related to the
23
violations alleged in the complaint and thereafter limit any civil penalty and injunctive
relief to the consequences of that conduct.
DIANE V. GRENDELL, J., concurs with a Concurring Opinion,
COLLEEN MARY O’TOOLE, J., dissents with a Dissenting Opinion.
____________________
DIANE V. GRENDELL, J., concurs with a Concurring Opinion.
{¶70} I concur in the decision to reverse the trial court’s judgment and remand
this matter for a proper determination of damages based on the alleged violations of
R.C. 6111.04(A) contained in the complaint, i.e., the “discharge of materials into the
East Branch Chagrin River.” Supra at ¶ 57. It is evident from the trial court’s judgment
that its determination of the appellants’ liability relied heavily on the dredging of the
stream channel and the failure to obtain permits rather than the discharge of materials.
See, e.g., “Anderson testified that the dredging activities significantly degraded fish and
macro invertebrate habitat”; “[t]he dredging throughout the river resulted in a loss of
riffles, pools and bank vegetation”; and “significant adverse changes in the morphology
and habitat of the river were caused by the dredging.” July 29, 2016 Opinion and
Judgment Entry, at 12, 16, and 18.
{¶71} I would also point out the trial court, in its consideration of damages, noted
that the appellants “chose not to settle at the administrative level” and, “unlike the
Village of Kirtland Hills, * * * did not agree to measures to remediate the river,” and also
“obtained an economic benefit from being able to farm the extensive lands owned by
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the Village of Kirtland Hills.” Opinion and Judgment Entry, at 19. The import of these
findings is compromised by the fact that the appellants were willing to adopt measures
to remediate the river if the State would have been willing to waive the right to seek civil
penalties as it had done for the Village of Kirtland Hills. The State’s failure to make this
concession has not been satisfactorily explained, particularly given that all the
appellants’ dredging activity was done at the behest of the Village. With respect to the
economic benefit derived by the appellants, this literally consisted of grass for
consumption by appellants’ horses. There is little in the record to support a finding of
bad faith or self-interest on the part of the appellants.
{¶72} Accordingly, I concur in the judgment and opinion of this court.
____________________
COLLEEN MARY O’TOOLE, J., dissents with a Dissenting Opinion.
{¶73} I respectfully dissent.
{¶74} I would uphold the lower court’s ruling in toto as the majority disregards
the overriding concept of notice pleading. Ohio law does not ordinarily require a plaintiff
to plead operative facts with particularity. Civ.R. 8(A) requires only a short and plain
statement of the claim that gives the defendant fair notice of the plaintiff's claim and the
grounds upon which it is based. A plaintiff is not required to outline the legal theory
case at the pleading stage and is required only to give reasonable notice of the claim. It
is not required that a complaint contain more than ‘“brief and sketchy allegations of fact
to survive a motion to dismiss under the notice pleading rule.”’ (Internal citations
omitted.) Ogle v. Ohio Power Co., 180 Ohio App.3d 44, ¶5 (4th Dist.). Additionally
25
courts must be mindful of the admonition that cases should be decided on their merits,
where possible, rather than procedural grounds. Sericola v. Johnson, 11th Dist.
Trumbull No. 2015-T-0091, 2016-Ohio-1164, ¶19, citing State ex rel. Lindenschmidt v.
Bd. of Commrs. of Butler Cty., 72 Ohio St.3d 464, 466 (1995).
{¶75} Secondly, in the event that the defendants did not understand or could not
discern which laws or specific sections of the statute they violated, their remedy in a
notice pleading framework would be to file a motion for a more definite statement under
Civ.R. 12(E). The defendants in this matter are familiar with commercial contracts and
dealing with builders and should have known to inquire as to what permits were needed
regarding property that they did not own or control. As such I would affirm the trial court
in total.
{¶76} I respectfully dissent.
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