State v. Harenda Enterprises, Inc. , 307 Wis. 2d 604 ( 2008 )

ANNETTE KINGSLAND ZIEGLER, J.

¶ 78. (dissenting). In an area as crucial as asbestos removal, it is important to have clear, understandable, enforceable testing methods. In general, clarifications may be a useful guide, but the "clarifications" in this case are inconsistent with the plain language of the rule and more than interpretive guidelines. In fact, the "clarifications" effect a substantive change rather than clarify the alleged ambiguity in the 1990 rule. Despite the fact that the "clarifications" do not clarify the alleged ambiguity, are contrary to the promulgated rule, and were not adopted in this state, the majority still gives them the force of law. As a result, I must respectfully dissent.

I

¶ 79. Asbestos is a group of minerals that naturally occur as fibers. It has been widely used in many industrial products such as flooring, textiles, and insulation.¹ Exposure to asbestos can lead to mesothelioma, which is a rare form of cancer that affects the protective sac of most internal organs such as the lungs. "Most people who develop mesothelioma have worked on jobs where they inhaled asbestos particles."² Symptoms, however, may not appear until 30 to 50 years after exposure. The incidence of this rare cancer has increased over the past 20 years but may be stabilizing now. Once symptoms appear and the cancer is diagnosed, the disease is often very advanced.³ Mesothe-lioma is often associated with a horrible death.

II

¶ 80. The Clean Air Act regulates hazardous pollutants, such as asbestos. 42 U.S.C.A. § 7412 (West 1999). The Environmental Protection Agency (EPA) enacted the National Emission Standards for Hazardous Air Pollutants (NESHAP) pursuant to its authority under § 7412. In 1973, the EPA promulgated the first asbestos NESHAP regulation. See 38 Fed. Reg. 8,820, 8,826-30 (Apr. 6, 1973). The asbestos NESHAP specifies procedures for removing certain asbestos materials. 40 C.F.R. Pt. 61, Subpt. M, § 61.145. The 1973 regulation underwent significant changes in 1990 in order to "enhance enforcement and promote compliance with the current standard without altering the stringency of existing controls." 55 Fed. Reg. 48,406, 48,406 (Nov. 20, 1990).

¶ 81. Following the proper rule-making process, the EPA established the "Interim Method" for determining asbestos content in bulk samples.⁴ See id. at 48,415; 40 C.F.R. Pt. 763, Subpt. E, App. E, § 1.7.2.1, Gross Examination. The DNR incorporated by reference the 1990 testing method, but it did not so incorporate the 1994 and 1995 clarifications.⁵ The 1990 method seems to require the following: (1) examine the core sample for homogeneity; (2) if the sample is homogeneous, identify fibers and quantify asbestos content for the sample; (3) when discrete strata are identified, the fibers in each layer are identified and quantified; "and then" (4) after the layers are quantified, the results of each layer are combined to yield an estimate of asbestos content for the whole sample. See, e.g., State v. Harenda Enters., Inc., 2006 WI App 230, ¶ 4, 297 Wis. 2d 571, 724 N.W.2d 434.

¶ 82. The plain language of the 1990 rule is instructive. It does not stop at the analysis of each layer. It reads: "and then the results for each layer are combined to yield an estimate of asbestos content for the whole sample." (Emphasis added.) If the rule was intended to require removal when any one layer was over one percent, the rule would not need the last clause, which requires that layers be combined to yield a result for the whole sample.

¶ 83. The majority, however, concludes that the language in § 1.7.2.1 is ambiguous because of the word "combined." See majority op., ¶¶ 29-36. As a result, the majority relies on the 1994 and 1995 EPA clarifications, which undermine the plain language of the properly promulgated 1990 rule.⁶ The majority accepts the two EPA "clarifications" even though they do not have the force of law, are contrary to the plain language of the rule, and read the "combined" requirement out of existence. See majority op., ¶¶ 38-49. Because the clarifications (1) do not clarify the ambiguity; (2) were not properly promulgated and are not the law of this state; and (3) fail to fully protect the worker, I must dissent.

A

¶ 84. Even if we look to the 1994 and 1995 clarifications and ignore the fact that the DNR did not adopt the clarifications but adopted only the 1990 rule, the clarifications still do not clarify the alleged ambiguity of what "combined" means. In 1994 and 1995, the EPA produced "clarifications" for the 1990 rule. The January 5, 1994, clarification briefly explained, "when a sample consists of two or more distinct layers or materials, each layer should be treated separately and the results reported by layer (discrete stratum)." 59 Fed. Reg. 542 (Jan. 5,1994). Even if this is an explanation, it still fails to explain what actions should be taken to combine layers to yield an estimate for the whole sample.

¶ 85. To add to the confusion, the second clarification, issued in 1995, states that combining layers was never allowed. That contention, however, is clearly contrary to the plain language of the rule. The 1995 clarification states that the "unwritten policy" of the EPA dating back to the 1970s "was that each layer in a multi-layered system was to be analyzed as a separate material (no averaging or dilution by combining layers of asbestos-containing material with nonasbestos-containing material was allowed)." 60 Fed. Reg. 65,243 (Dec. 19, 1995). While this new test — the single layer approach — may be a better approach, it is contrary to the 1990 rule's plain language. Rather than clarify the alleged ambiguity, the clarifications create a new and distinct rule.

B

¶ 86. Under our system of government, any enforceable rule, however, must be vetted through the proper rule-making process. The rule-making process is an important part of our democracy. It gives interested parties the opportunity to be heard. The Administrative Procedures Act governs the promulgation of new federal agency rules, 5 U.S.C.A. § 553, and chapter 227 of the Wisconsin Statutes governs the promulgation of Wisconsin agency rules. Rules must be subjected to a notice and comment period before they may take effect. 5 U.S.C.A. § 553(b) and (c); Wis. Stat. §§ 227.16-227.19. The notice and comment period occurred at the state and federal level for the 1990 rule, but it never occurred with respect to the 1994 and 1995 clarifications. Because the clarifications effect substantive change and create a new rule, the rule-making process was required.

¶ 87. When a rule is interpretive rather than substantive, the rule is excepted from the notice and comment period requirements. 5 U.S.C.A. § 553(c). Whether a rule is substantive rather than interpretive, however, depends upon whether it creates rights, assigns duties, or imposes new obligations. See Hemp Indus. Ass'n v. Drug Enforcement Admin., 333 F.3d 1082, 1087 (9th Cir. 2003) (concluding (1) that a legislative or substantive rule promulgated without following the rule-making requirements is invalid; and (2) that a rule is legislative or substantive if it imposes new obligations or changes existing law).⁷

¶ 88. Here, there can be no question that the 1994 and 1995 clarifications effect a substantive change to the law, impose new obligations on companies such as Harenda, and create significant civil or criminal liability. The "clarifications" change the analysis from a multi-layered approach to a single-layer approach. This changes the rule — without following proper rule-making procedures — because instead of a quantity of asbestos for the whole sample giving rise to an obligation for special removal procedures, a company, such as Harenda, must follow special removal procedures when only one layer out of many contains greater than one percent asbestos. Because the clarifications impose new obligations upon companies such as Harenda, the clarifications change the rules governing asbestos testing.⁸ In fact, the State seems to concede that the clarifications change the rule; the State admits that it cannot meet its burden of proof if the clarifications are not the law.⁹ Thus, the clarifications substantively change the rules governing asbestos testing.

¶ 89. The EPA even acknowledged its responsibility to promulgate a new rule so that it could properly enforce the new test. The 1995 clarification itself states that with regard to the composite analysis method, the "EPA intends to amend the asbestos NESHAP in the near future to refer specifically to these procedures." 60 Fed. Reg. 65,243 (Dec. 19, 1995). However, the EPA never took that action.

¶ 90. The 1995 clarification devised an alternative cost-saving test method, which allows one to have the composite analyzed first. Id. If the "composite analysis shows that the average content for the multi-layered" sample is over one percent, then the material must be treated as asbestos containing (ACM). Id. (Emphasis added.)¹⁰ However, if the composite analysis yields asbestos below one percent but greater than zero, then analysis by layers is required to ensure that no layer is greater than one percent asbestos content, which would deem that layer an asbestos containing layer giving rise to precautionary measures for the entire sample without combining. Id. Thus, under this clarification, if one layer is greater than one percent, the entire sample is considered ACM. This, however, is contrary to the language of the 1990 promulgated rule, and the DNR never adopted the clarifications. As acknowledged by the EPA, new action is required to promulgate the 1995 testing method.

¶ 91. As we see in this case, the clarifications have been enforced by the DNR as if they have the force of a properly promulgated rule, despite the fact that our state did not incorporate by reference the clarifications¹¹ and they effect a substantive change to the rule. While an agency may interpret rules, they cannot effect a new rule that changes the substantive rule. In effect, new rules governing asbestos testing, which could result in civil or criminal penalties, have been imposed without following proper rule-making procedures. See United States v. San Diego Gas & Elec. Co., No. 06-CR-65-DMS, 2006 WL 3913457, at *6-8 (S.D. Cal. Nov. 21, 2006) (concluding that the clarifications are legislative and thus impose new obligations on companies even though the proper rule-making process was not followed; therefore, a company cannot be held liable based on testing methods articulated by the clarifications).

¶ 92. Proper rule making is important because matters are openly debated and people have the opportunity to be heard. It is fundamentally unfair to subject anyone to significant liability — especially criminal liability — when proper rule making did not occur. Here, Harenda was exposed to $4 million in liability.¹² If the State intends to hold people or companies liable— potentially criminally liable — the rules must be properly enacted.¹³ Furthermore, it runs counter to our system of justice to hold anyone civilly liable, and especially criminally liable, when the proper testing method is ambiguous as the majority claims.

¶ 93. The rule of lenity must be considered. While the case at hand is a civil action, our interpretation of the rule will affect those who are subject to criminal prosecution for "asbestos violations." The rule of lenity provides "that ambiguous penal statutes should be interpreted in favor of the defendant." State v. Cole, 2003 WI 59, ¶ 67, 262 Wis. 2d 167, 663 N.W.2d 700. "More specifically, the rule of lenity comes into play after two conditions are met: (1) the penal statute is ambiguous; and (2) we are unable to clarify the intent of the legislature by resort to legislative history." Id. The majority concludes that the rule is ambiguous and thus the first prong is satisfied. Perhaps the clarifications could be utilized under the second prong to ascertain the intent of the EPA, but when the legislative history or "clarifications" change the substantive rule's plain language, we cannot rely on it to uphold liability.

¶ 94. Here, the clarifications do not merely explain substantive law. Rather, they impose new obligations by changing existing law. Thus, the clarifications introduce substantive changes in the law without following the proper rule-making procedures.¹⁴

C

¶ 95. The current testing methods and procedures are dangerously ineffective. Harenda and the DNR both had testing completed under the clarifications method, yet they still acquired different results. Not only were the results different pre- and post-demolition, but the tests conducted post-demolition produced competing results. Harenda's pre-demolition samples did not give rise to special precautions. Post-demolition samples, however, which were divided and given to both Harenda and the State, were not consistent with each other although both results would have required ACM precautions. When the same test yields different results, even on the same sample area, how does a court resolve these competing facts at summary judgment?

¶ 96. While the DNR argues that the clarifications result in safer working conditions, they still do not actually protect the worker. Although this court cannot require it, our federal and state government should consider implementing guidelines that actually protect the worker, such as requiring state authorities to conduct testing prior to demolition. If the clarifications are "adopted" by this court, then the DNR should act to properly adopt them. For example, the state of New Jersey enacted 'emergency rules' for the sole purpose of adopting the clarifications. See Robert M. Howard, Patricia Guerrero, David B. McGrath, Drew R. Van Orden, The EPA's Prosecution of Clean Air Act Asbestos NESHAP Cases Based Upon Non-binding Bulk Material Test Methods, 44 San Diego L. Rev. 173, 207-08 (2007). "New Jersey explained that the 1993 test [i.e., the 1994 clarification] method is preferable to the 1990 test method because the enumerated NESHAP 1990 test method underreports asbestos content...." Id. at 208. Our state has not so acted.

III

¶ 97. The "clarifications" do not clarify the 1990 rule. The 1994 clarification promotes a single-layer test, which is not the test articulated in the properly enacted rule. The 1995 clarification confuses the issue even more. The clarifications do not clarify what "combined" means. Moreover, the clarifications are inconsistent with the plain language of the rule and are more than interpretive guidelines. In fact, they effect a substantive change. The clarifications and the majority's interpretation eliminate the last clause of the rule even though the clarifications have not been subjected to the proper rule-making process. The government should be required to clearly articulate and enact the lawful test in order to ensure that citizens are not exposed to asbestos and put companies on notice about potentially, significant liability for a violation of the "properly enacted rule."

¶ 98. Here, neither the EPA nor the DNR properly promulgated the clarifications. The clarifications effected a substantive change to the "Interim Method," and they are not the law of this state. In the case at issue, the State's motion for summary judgment should not have been granted.

¶ 99. For the foregoing reasons, I respectfully dissent.

¶ 100. I am authorized to state that Justices DAVID T. PROSSER and PATIENCE DRAKE ROGGENSACK join this dissent.

1 National Cancer Institute, U.S. National Institutes of Health, Mesothelioma: Questions and Answers, available at http://www.caneer.gov/cancertopics/factsheet/Sites-Types/me-sothelioma.

2 Id.

3 American Cancer Society, ACS: What are the Key Statistics about Malignant Mesothelioma?, available at http://www. cancer.org/docroot/CRI/content/CRI_2_4_lX_What__are_the_key _statistics_for_malignant_mesothelioma_29.asp?sitearea=, revision 10/19/06.

4 Section 1.7.2.1, Gross Examination, provides:

Bulk samples of building materials taken for the identification and quantitation of asbestos are first examined for homogeneity at low magnification with the aid of a stereomicroscope. The core sample may be examined in its container or carefully removed from the container onto a glassine transfer paper or clean glass plate. If possible, note is made of the top and bottom orientation. When discrete strata are identified, each is treated as a separate material so that fibers are first identified and quantified in that layer only, and then the results for each layer are combined to yield an estimate of asbestos content for the whole sample.

40 C.F.R. Pt. 763, Subpt. E, App. E, § 1.7.2.1. (Emphasis added.)

5 The 1990 testing method, unlike the clarifications, was incorporated by reference on December 4,1994. See Wis. Admin. Code § NR 484.04(28) (July 2007) (incorporating by reference 40 C.F.R. Pt. 763, Subpt. E, App. E, § 1 for §§ NR 447.02(l)(a) and (b), 447.02(16), 447.02(27), 447.02(36), 447.09(l)(a) and (b) (intro)).

6 The majority defers to the agency's interpretation stating, "[a]n administrative agency's interpretation of its own regulations is controlling 'unless the interpretation is inconsistent with the language of the regulation or is clearly erroneous.'" See majority op., ¶ 25 (citing Orion Flight Servs., Inc. v. Basler Flight Serv., 2006 WI 51, 290 Wis. 2d 421, 714 N.W.2d 130. Because the agency's interpretation is inconsistent with the properly promulgated rule, I give no deference to the agency's interpretation. See part B of this dissent. However, as the court of appeals so aptly stated, "[irrespective of what level of deference is appropriate, [] an agency interpretation may not trump a statute's clear language." State v. Harenda Enters., Inc., 2006 WI App 230, ¶¶ 8-9, 297 Wis. 2d 571, 724 N.W.2d 434.

7 See also Yesler Terrace Cmty. Council v. Cisneros, 37 F.3d 442, 449 (9th Cir. 1994) (discussing the difference between interpretive and legislative rules); Elizabeth Williams, What constitutes "interpretative rule" of agency so as to exempt such action from notice requirements of Administrative Procedure Act (5 USCS § 553(b)(3)(A), 126 A.L.R. Fed. 347 (1995).

8 See, e.g., Robert M. Howard, Patricia Guerrero, David B. McGrath, Drew R. Van Orden, The EPAs Prosecution of Clean Air Act Asbestos NESHAP Cases Based Upon Non-binding Bulk Material Test Methods, 44 San Diego L. Rev. 173, 202-03 (2007) (identifying five substantive differences between the 1990 and 1993 test methods: (1) averaging of multilayered material, which has been through federal rulemaking three times, is rejected by the 1993 test method; (2) the 1990 rule "mandates 'representative,' multilayered samples to quantify asbestos content layer-by-layer" instead of material becoming regulated if any single layer is greater than one-percent asbestos; (3) changing the "small quantity" criteria for pipe wrap; (4) unlike the 1993 test method, the 1990 "method makes no laboratory determination of friability, as a predictor of the material's actual condition in the field"; (5) "[ujnlike the 1990 test method, the newer 1993 test method requires laboratories to report on friability as that term is separately defined" in the new test method). The 1993 method, which this article refers to, is the method discussed in the clarifications. See id. at 182-86 (referring to R.L. Perkins & B.W Harvey, Test Method, Method for the Determination of Asbestos in Bulk Building Materials, U.S. Envtl. Prot. Agency, EPA/600/R-93/116 (1993)).

9 At the summary judgment hearing, the State said:

Then, question number 2 is whether or not the clarifications apply. Again, every test result that the State submitted were — used the clarification method. Every one. Why? Because they were all certified labs. And all certified labs under the NVLAP procedures have to follow the clarifications. They were all analyzed by layer. Tm first to admit that if you throw out the clarifications, you throw out the State's test results. Every one was analyzed I believe under the NVLAP approach. And so this is obviously a pivotal aspect.

(Emphasis added.)

10 Presumably, this "averaging" arises out of the last sentence in § 1.7.2.1, Gross Examination. The 1995 clarification, thus, appears to try and utilize "combine" from § 1.7.2.1.

11 In 1994, the DNR incorporated by reference the federal 1990 rule. See Wis. Admin. Code § NR 484.04(28) (incorporating only 40 C.F.R. Pt. 763, Subpt. E, App. E, § 1, which does not include the "clarifications"). The clarifications have never been incoi’porated by reference. Moreover, the 1994 clarification was in place when the DNR incorporated the 1990 rule by reference. If the DNR wanted to adopt the clarification it could have taken action in 1994 or at a later time. C† Wis. Admin. Code § NR 484.04 with Wis. Admin. Code § NR 352.03 (incorporating by reference "[a]ll of the following federal manual, memoranda, guidelines, regulatory guidance letters or other provision established by the U.S. Army Corps of Engineers interpreting the 1987 wetlands delineation manual shall be used when delineating nonfederal wetland boundaries").

12 Violations are contrary to Wis. Admin. Code §§ NR 447.08(6)(a), 447.08(6)(b), 447.08(1), and 447.13(1). Potential penalties for violations of asbestos regulations are provided in § NR 447.19, Penalties; it reads:

(1) The department may take appropriate enforcement action against any owner or operator of a demolition or renovation activity or any owner or operator of an active landfill, to which this chapter applies, that violates this chapter. Appropriate enforcement action includes letters of nón-compliance, notices of violation, citations, referrals to the Wisconsin department of justice, and deferral or referrals to the United States environmental protection agency. Any enforcement action the department may take shall be based upon factors such as severity, duration, frequency and environmental or health risks of the violation.

(3) A citation may be issued which requires a forfeiture of not less than $500, nor more than $5,000, for each violation, except as provided in sub. (4). Each day of continued violation is a separate offense.

(4) When any owner or operator is found in violation of the regulatory requirements listed in sub. (2) by any court of this state, and the violation remains of record and unreversed, for any second or subsequent violation of the regulatory requirements listed in sub. (2) occurring within a 5-year period from the date of the prior adjudication, the minimum and maximum citation forfeitures shall be doubled.

13 See Wis. Stat. § 285.87, Penalties for violations relating to air pollution (asserting criminal penalties for violations of ch. 285 of the Wisconsin Statutes or any rule promulgated under ch. 285). Wisconsin Admin. Code ch. NR 447 was adopted under Wise. Stat. §§ 285.11, 285.13, 285.17 and 285.27). Wisconsin Stat. § 285.87 reads:

(1) Except as provided in s. 285.57(5) or 285.59(8), any person who violates this chapter or any rule promulgated, any permit issued or any special order issued under this chapter shall forfeit not less than $10 or more than $25,000 for each violation. Each day of continued violation is a separate offense.

(2)(a) Except as provided in par. (b), any person who intentionally commits an act that violates, or fails to perform an act required by this chapter, except s. 285.59, or any rule promulgated, any permit issued or any special order issued under this chapter, except s. 285.59, shall be fined not more than $25,000 per day of violation or imprisoned for not more than 6 months or both.

(b) If the conviction under par. (a) is for a violation committed after another conviction under par. (a), the person is guilty of a Class I felony, except that, notwithstanding the maximum fine specified in s. 939.50(3)(i), the person may be fined not more than $50,000 per day of violation.

14 The majority claims the dissent leaves the state of Wisconsin without any meaningful regulation, and it claims the dissent would invalidate the interpretive rule. See majority op., ¶ 49 n.ll. The majority, however, invalidates the substantive rule. Here, the clarifications, i.e., the "interpretive rule," so change the plain language of the rule that the clarifications are not entitled to the force of law unless they are properly promulgated. The properly promulgated 1990 rule, which the state of Wisconsin has incorporated by reference, is the only valid rule governing asbestos testing.