Rollingwood Acres, Inc. v. Rhode Island Department of Environmental Management , 212 A.3d 1198 ( 2019 )

June 24, 2019
Supreme Court
No. 2015-328-M.P.
(PC 14-1339)
Rollingwood Acres, Inc. et al. :
v. :
Rhode Island Department of Environmental :
Management et al.
NOTICE: This opinion is subject to formal revision before
publication in the Rhode Island Reporter. Readers are requested to
notify the Opinion Analyst, Supreme Court of Rhode Island, 250
Benefit Street, Providence, Rhode Island 02903, at Telephone 222-
3258 of any typographical or other formal errors in order that
corrections may be made before the opinion is published.
Supreme Court
No. 2015-328-M.P.
(PC 14-1339)
Rollingwood Acres, Inc. et al. :
v. :
Rhode Island Department of Environmental :
Management et al.
Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.
OPINION
Chief Justice Suttell, for the Court. Rollingwood Acres, Inc. (Rollingwood), Smithfield
Peat Co., Inc. (Smithfield Peat), and Smithfield Crushing Co., LLC (Smithfield Crushing)
(collectively, plaintiffs) appealed from a Notice of Violation (NOV) issued on November 6, 2006
by the Rhode Island Department of Environmental Management (DEM). The NOV alleged ten
discrete violations of the Rhode Island Water Pollution Act, DEM’s Water Quality Regulations,
the Rhode Island Oil Pollution Control Act, DEM’s Oil Pollution Control Regulations, and DEM’s
Regulations for the Rhode Island Pollution Discharge Elimination System. After a hearing before
the Administrative Adjudication Division of DEM (AAD), the plaintiffs prevailed on all but two
of the alleged violations. The plaintiffs requested reasonable litigation expenses under the Equal
Access to Justice for Small Businesses and Individuals Act, G.L. 1956 chapter 92 of title 42
(EAJA). The AAD hearing officer denied their request, finding that DEM’s “decision to initiate
and proceed with the enforcement action was based on substantial justification” within the
meaning of EAJA. The plaintiffs appealed to the Superior Court under the Administrative
Procedures Act, G.L. 1956 chapter 35 of title 42 (APA), which upheld the AAD’s denial of
reasonable litigation expenses. The plaintiffs then filed a petition for the issuance of writ of
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certiorari, seeking this Court’s review of the Superior Court’s decision, which we granted. For the
reasons set forth in this opinion, we quash the judgment of the Superior Court.
I
Facts and Travel
This case has a protracted history dating back to the 1980s. The facts of the case have been
recounted many times throughout the various administrative and Superior Court decisions;
therefore, we include only details relevant to the case before us now.
A
Permit Issuance
Rollingwood is the record owner of property located at 961 Douglas Pike, Route 7, in
Smithfield (the property). Smithfield Peat operates a leaf and yard waste composting facility at
the property and is registered with the United States Environmental Protection Agency (EPA) as
a hazardous waste generator. Smithfield Crushing operates a rock crushing facility at the
property.1
In May 1982, DEM issued a freshwater wetlands permit to Smithfield Peat. The permit
authorized Smithfield Peat to alter freshwater wetlands by excavating, filling, and grading within
fifty feet of an unnamed swamp to remove peat, construct two stormwater detention basins, install
a sewer line, and construct a road. In accordance with the permit, Smithfield Peat was required to
use fifteen-inch-diameter discharge pipes as part of its stormwater detention basins. The plaintiffs
spent over $100,000 and two years constructing the authorized drainage structure.
1
All three entities list their principal place of business as 295 Washington Highway, Smithfield,
Rhode Island. Jackson Despres is the Vice President of Rollingwood, President of Smithfield Peat,
and Managing Member of Smithfield Crushing.
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B
Complaint and Initial Inspections
From 1996 through 1997, the Rhode Island Department of Transportation (DOT) carried
out a project to improve Route 7. Part of this project was located along Rollingwood’s property.
Without plaintiffs’ knowledge and without seeking a permit from DEM, DOT replaced plaintiffs’
fifteen-inch-diameter pipe with an eighteen-inch-diameter pipe. The plaintiffs discovered the
larger pipe only after DOT had finished its project. The larger pipe resulted in the drainage
system’s increased discharge of turbid, or sediment-laden, water into a stream.
To add insult to injury, on December 3, 1996, a DOT employee filed a complaint with
DEM stating that plaintiffs’ drainage structure was discharging turbid water into a stream. As a
result, DEM, through its Office of Compliance and Inspection (OC&I), made two site inspections
in January 1997. Sean Carney, a site inspector, observed a “discharge of sediment into a stream
in non-conformity with the permit letter * * * .” DEM concluded that the sediment was discharging
from plaintiffs’ detention basin and that the Route 7 project had also contributed to unpermitted
discharge levels. On June 3, 1997, DEM issued a Notice of Intent to Enforce (NOIE) to plaintiffs,
which required remediation of the drainage structure. The plaintiffs apparently took no action in
response to the NOIE, nor did DEM seek to enforce the NOIE; however, DEM’s case file on this
matter remained open.
C
Follow-Up Investigations and Discovery of the Oil Pollution Violations
Over eight years later, DEM revisited the property on February 9, 2005, when Peter
Naumann, a DEM site inspector, was investigating another complaint in the area. During that
inspection, Naumann noticed an “oily sheen” in one of plaintiffs’ retention ponds, which caused
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him to suspect an oil spill. Naumann quickly notified plaintiffs and DEM Emergency Response.
The plaintiffs immediately secured Lincoln Environmental, Inc. for remedial work, which, within
hours, began containing and cleaning up the oil discharge.
On February 10, 2005, Naumann returned to the property for follow-up testing of the oil
spill and runoff water. He collected five water samples for a variety of tests, including turbidity
and hydrocarbon presence. Four of the water samples were taken from the water on the property
or downstream of the property, and one background sample was taken from a nearby, but
unconnected, stream. The samples revealed the presence of hydrocarbons, which indicated that a
petroleum product had been released on the property. The plaintiffs determined that the oil source
came from a pile of stone and waste rock that Smithfield Peat had recently obtained from the
Narragansett Bay Commission Combined Sewer Overflow Tunnel project.
On April 4, 2006, Patrick Hogan, another DEM site inspector, returned to take additional
water samples because the 2005 background sample, taken from an unconnected stream, could not
be used. Again, Hogan observed the discharge water’s turbidity. Hogan could not find an
appropriate upstream sample, and later testified that he was unable to do so because “[t]here is no
upstream with this location * * * [t]he water seems to begin right there.” Due to the lack of a
suitable upstream location to take a sample, Hogan collected a sample roughly 1,500 feet
downstream from the discharge to function as DEM’s background sample.
D
DEM’s Issuance of a Notice of Violation and Plaintiffs’ Administrative Appeal
On November 6, 2006, DEM issued an NOV against plaintiffs, and assessed an
administrative penalty of $31,470. The NOV charged plaintiffs with violations of the Rhode Island
Water Pollution Act, DEM’s Water Quality Regulations, the Rhode Island Oil Pollution Control
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Act, DEM’s Oil Pollution Control Regulations, and DEM’s Regulations for the Rhode Island
Pollution Discharge Elimination System.
The plaintiffs appealed the NOV to AAD. Five years later, an AAD hearing officer
conducted an extensive administrative hearing, with six days of testimony from nine witnesses
over the course of five months in late 2011 and early 2012. During the course of the hearing,
plaintiffs filed a motion to dismiss for failure to join DOT as an indispensable party, which was
denied before the end of the hearing.2
The AAD hearing officer issued a comprehensive decision on June 27, 2012 (Merits
Decision). Finding that DEM had not met its burden of proof by a preponderance of the evidence
to support most of the violations, the hearing officer dismissed all but two violations. The water
pollution violations were dismissed for lack of a valid background sample. The hearing officer
found that the water samples “were not taken in accordance with the Water Quality Regulations
and are of no use in proving a turbidity violation by [DEM].” “Without a valid upstream sample[,]”
the hearing officer noted, “all of [DEM’s] samples and testing on turbidity are meaningless.”
2
We note this action because of plaintiffs’ repeated insistence that DOT was to blame. On
December 6, 2011, at the end of DEM’s direct case, plaintiffs filed a motion to dismiss for failure
to join an indispensable party. The plaintiffs argued that the evidence in DEM’s case established
that DOT was an indispensable party to the pending appeal. In his decision and order, the hearing
officer recognized that the testimony and documentary evidence showed that, before DOT’s
project, plaintiffs’ drainage system was properly permitted and properly operating. The evidence
showed that it was, indeed, DOT’s removal of the fifteen-inch-diameter pipe and replacement with
the eighteen-inch-diameter pipe that caused the turbidity. The hearing officer, however, citing to
Root v. Providence Water Supply Board, 850 A.2d 94 (R.I. 2004) (discussing whether complete
relief can be afforded in the absence of the indispensable party), asked: “Can complete relief be
granted in the absence of [DOT] as a party?” He stated that although it was “clear that [DOT]
could have been cited” for its violations, and that he was “troubled” by DOT’s removal of a
properly permitted, properly functioning drainage system without seeking DEM approval, he did
not find DOT to be an indispensable party because relief could be afforded to plaintiffs without
DOT. The hearing officer further stated that plaintiffs’ evidence regarding DOT’s involvement
sounded more like a defense to the water pollution charges.
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David Chopy, director of OC&I, testified at the administrative hearing about DEM’s
decision to issue turbidity-related violations to plaintiffs rather than to DOT. He testified,
according to the Merits Decision, that “he didn’t know who changed the drainage system but
assumed that [plaintiffs], as owners of the property, had either made the change [to the drainage
system] or consented to it.” He further testified, the Merits Decision states, that “he didn’t have
any other facts or information” that would indicate that plaintiffs were responsible for the change
to the authorized drainage system. In the Merits Decision, the hearing officer noted that “[w]hen
asked if [Chopy] read the notes to file [on DOT’s involvement] Chopy’s response very often was
that he probably read the notes but didn’t recall.” The hearing officer stated: “After hearing all the
evidence on the issue of turbidity, it is clear that [plaintiffs] were victimized by [DOT]. Instead of
following up and holding [DOT] responsible for its involvement in this matter [DEM] charged
[plaintiffs] only.”
In dismissing two of the alleged oil pollution violations, the hearing officer at the outset
noted that these violations are “separate and apart” from the water pollution violations. He found
that plaintiffs were not aware of the oil discharge, thus they were not liable to DEM for failure to
immediately notify it of the release, and that, once aware, plaintiffs immediately initiated
remediation on the property, and thereby were not liable for failure to immediately clean the oil
discharge. The hearing officer did find that plaintiffs received product contaminated with oil and
were therefore responsible for the oil discharge into waters of the state under a strict liability
theory. The hearing officer reduced the administrative penalty from $31,470 to $2,615. When
explaining his decision to do so, the hearing officer noted that Chopy had testified that he had
assessed the warranted monetary penalty for plaintiffs’ violation as “moderate” rather than
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“minor”—not because of any factors in the Administrative Penalty matrix,3 but simply because
Smithfield Peat was a registered small-quantity generator with oil and he would expect its
employees to be familiar with oil releases.
Both parties timely appealed the hearing officer’s Merits Decision to the Superior Court,
and both appeals were ultimately dismissed.
E
EAJA Request
On July 27, 2012, plaintiffs filed a request for litigation expenses under the EAJA and Rule
1.20 of DEM’s AAD Rules and Regulations, 250 R.I. Code R. § 10-00-1.20.4 Finding that
plaintiffs were not “parties” under the EAJA, the hearing officer denied plaintiffs’ request. The
plaintiffs appealed that decision to the Superior Court. The Superior Court found plaintiffs to be
3
The DEM Rules and Regulations for Assessment of Administrative Penalties for Compliance
and Inspection, 250 R.I. Code R. ch. 130, provides for the calculation of administrative penalties.
Section 130-00-1.10 sets out the factors DEM will consider when calculating “the degree to which
the violation is out of compliance with the legal requirement allegedly violated.” 250 R.I. Code R.
§ 130-00-1.10(A)(1)(b). Those factors include:
“(1) The extent to which the act or failure to act was out of
compliance;
“(2) Environmental conditions;
“(3) The amount of the pollutant;
“(4) The toxicity or nature of the pollutant;
“(5) The duration of the violation;
“(6) The areal extent of the violation;
“(7) Whether the person took reasonable and appropriate steps to
prevent and/or mitigate the non-compliance;
“***
“(9) The degree of willfulness or negligence, including but not
limited to, how much control the violator had over the occurrence of
the violation and whether the violation was foreseeable[.]” Id.
4
General Laws 1956 § 42-92-4 of the EAJA requires agencies that are authorized to conduct
adjudicatory proceedings to “establish uniform procedures for the submission and consideration
of applications for an award[.]” Accordingly, 250 R.I. Code R. 10-00-1.20 is DEM’s regulatory
procedure related to filing for the recovery of litigation expenses under the EAJA. See infra
footnotes 8 and 9 for the pertinent text of Rule 10-00-1.20.
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“parties” under the EAJA and remanded the case to AAD to consider the merits of plaintiffs’ claim
for litigation expenses.
On February 28, 2014, in considering the substantive claim for litigation expenses, the
hearing officer denied plaintiffs’ request, finding that DEM had acted with substantial justification
(AAD EAJA Denial). Recognizing that most of the charges against plaintiffs had been dismissed,
the hearing officer nonetheless found that DEM was substantially justified both in initiating the
investigation as a response to a complaint and in pursuing the NOV. The plaintiffs appealed to the
Superior Court on March 14, 2014.
F
Superior Court Decision
The Superior Court set a briefing schedule, and plaintiffs and defendants filed memoranda
on the AAD EAJA Denial. On December 15, 2014, the trial justice issued her decision upholding
the AAD EAJA Denial. The plaintiffs filed a motion to reconsider on June 18, 2015, which was
heard and denied on September 10, 2015. Final judgment entered on October 9, 2015. The
plaintiffs filed a petition for writ of certiorari with this Court seeking our review, which we granted.
II
Statutory Framework
As this is the first opportunity we have had to review a fee determination initially awarded
or denied under § 42-92-3(a), we are mindful of the stated purpose of the EAJA:
“It is declared that both the state and its municipalities and their
respective various agencies possess a tremendous power in their
ability to affect the individuals and businesses they regulate or
otherwise affect directly. * * * Therefore, in order to encourage
individuals and small businesses to contest unjust actions by the
state and/or municipal agencies, the legislature hereby declares that
the financial burden borne by these individuals and small businesses
should be, in all fairness, subject to state and/or municipal
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reimbursement of reasonable litigation expenses when the
individual or small business prevails in contesting an agency action,
which was without substantial justification.” Section 42-92-1(a) and
(b).
The EAJA is a remedial statute which we are bound to read expansively to effectuate its stated
purpose of reimbursing reasonable litigation expenses when contesting “unjust actions by the
state[.]” Section 42-92-1(b). That is significant in this case because the actions at issue were
perpetrated by two state agencies, only one of which is a party to this litigation.
The EAJA sets forth two procedural avenues, one for each of the fora in which the initial
fee determination may be made: the agency or the court. See Tarbox v. Zoning Board of Review of
Town of Jamestown, 142 A.3d 191, 196-97 (R.I. 2016). The first path occurs when a party is
successful on the underlying merits at the agency level. Section 42-92-3(a) provides that “the
adjudicative officer shall award to a prevailing party reasonable litigation expenses incurred by the
party in connection with that proceeding” unless the officer “finds that the agency was
substantially justified in actions leading to the proceedings and in the proceeding itself.” Notably,
§ 42-92-3(a) explicitly prohibits any other agency official from reviewing the EAJA award. If a
party is “dissatisfied with the fee determination by the adjudicatory officer,” he or she may appeal,
under § 42-92-5, “to the court having jurisdiction to review the merits of the underlying decision
of the agency adversary adjudication.” Section 42-92-5; see also Tarbox, 142 A.3d at 197. The
statute further provides for “a de novo review of the record” by the court. Id.
The second scenario, with which we are not confronted in this matter, occurs under § 42-
92-3(b). In such a case, a party receives an unfavorable decision on the underlying merits at the
administrative level and then appeals to the appropriate court. See Tarbox, 142 A.3d at 196-97. If
the court reviews the underlying agency decision and the party is successful in the appeal, “an
award for fees and other expenses shall be made by that court[.]” Section 42-92-3(b).
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Either way, whether a party may recoup litigation expenses hinges on whether the
administrative agency was substantially justified in its actions. See § 42-92-3. An agency is
substantially justified when “the initial position of the agency, as well as the agency’s position in
the proceedings, ha[d] a reasonable basis in law and fact.” Section 42-92-2(7). This Court has
previously commented that, pursuant to the EAJA substantial justification test, the state “must
show not merely that its position was marginally reasonable; its position must be clearly
reasonable, well founded in law and fact, solid though not necessarily correct.” Taft v. Pare, 536
A.2d 888, 893 (R.I. 1988) (quoting United States v. 1,378.65 Acres of Land, 794 F.2d 1313, 1318
(8th Cir. 1986)) (expressly adopting the Eighth Circuit’s standard of interpretation).
Notably, the substantial justification question “will not be precisely the same as the
merits[,]” rather it is “what the Government was substantially justified in believing [the law] to
have been.” Pierce v. Underwood, 487 U.S. 552, 561 (1988) (analyzing 28 U.S.C. § 2412, the
federal equivalent of the EAJA).5 When considering the EAJA request, the court “reexamine[s]
the legal and factual circumstances of the case from a different perspective than that used at any
other stage of the proceeding[.]” United States v. Hallmark Construction Co., 200 F.3d 1076, 1080
(7th Cir. 2000). In doing so, the court “look[s] at the merits of the underlying action to determine
if the government’s position is justified.” Oregon Natural Resources Council v. Madigan, 980
F.2d 1330, 1331 (9th Cir. 1992). A substantial justification analysis often requires a review of the
record of the underlying merits decision to evaluate whether an agency’s position initially was and
remained justified. See, e.g., id. at 1331-32; Kali v. Bowen, 854 F.2d 329, 332 (9th Cir. 1988);
5
Rhode Island’s EAJA is modeled on the federal EAJA, 28 U.S.C. § 2412. Krikorian v. Rhode
Island Department of Human Services, 606 A.2d 671, 674 (R.I. 1992). Accordingly, we may turn
to federal caselaw for guidance. Id. (“When a Rhode Island statute is modeled on a federal statute,
this [c]ourt ‘should follow the construction put on it by the federal courts, unless there is strong
reason to do otherwise.’”) (quoting Laliberte v. Providence Redevelopment Agency, 109 R.I. 565,
575, 288 A.2d 502, 508 (1972)).
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Tarbox, 142 A.3d at 198; Krikorian v. Rhode Island Department of Human Services, 606 A.2d
671, 676 (R.I. 1992). To be sure, this Court has previously acknowledged that “any appeal from
the grant or denial of a request for reasonable litigation expenses is necessarily intertwined with
the agency decision”; such a request “cannot be divorced from the underlying agency action.”
Tarbox, 142 A.3d at 198. We further emphasized that “any attempt to separate a request for
reasonable litigation expenses under the act from review of the underlying agency decision is
wholly artificial.” Id.
III
Standard of Review
“We review the trial justice’s denial of the motion for reasonable litigation expenses under
the [EAJA], as a question of law, de novo.” Campbell v. Tiverton Zoning Board, 15 A.3d 1015,
1024 (R.I. 2011). Because the question of fee determination is “necessarily intertwined with the
[underlying] agency decision[,]” Tarbox, 142 A.3d at 198, we accord deference to the findings of
fact in the agency’s decision. See Pierce, 487 U.S. at 559.
As the trial justice noted, the statutory scheme of the EAJA creates an apparent conflict
concerning the scope of judicial review of the fee determination by the adjudicatory officer.
Section 42-92-5 permits the court to modify the fee determination “upon a de novo review of the
record.” Section 42-92-7, however, clarifies that the EAJA “is intended to supplement the
provisions of” the APA, and that the APA controls in the event of any conflict between the two.
The APA provides for a deferential standard of review:
“The court shall not substitute its judgment for that of the agency as
to the weight of the evidence on questions of fact. The court may
affirm the decision of the agency or remand the case for further
proceedings, or it may reverse or modify the decision if substantial
rights of the appellant have been prejudiced because the
administrative findings, inferences, conclusions, or decisions are:
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“(1) In violation of constitutional or statutory provisions;
“(2) In excess of the statutory authority of the agency;
“(3) Made upon unlawful procedure;
“(4) Affected by other error or law;
“(5) Clearly erroneous in view of the reliable, probative, and
substantial evidence on the whole record; or
“(6) Arbitrary or capricious or characterized by abuse of discretion
or clearly unwarranted exercise of discretion.” Section 42-35-15(g).
To reconcile this seeming conflict, the trial justice appropriately turned to this Court’s analysis in
Environmental Scientific Corp. v. Durfee, 621 A.2d 200 (R.I. 1993), wherein we held that an
appellate tribunal must defer to the evidentiary findings of an administrative hearing officer when
credibility evaluations are implicated. Durfee, 621 A.2d at 206. “The [hearing officer’s]
impressions as he or she observes a witness and listens to testimony ‘are all important to the
evidence sifting which precedes a determination of what to accept and what to disregard.’” Id.
(quoting Laganiere v. Bonte Spinning Co., 103 R.I. 191, 196, 236 A.2d 256, 258 (1967)).
Here, the hearing officer conducted an extensive hearing on the underlying merits of
DEM’s NOV, encompassing at least six separate dates, during which nine witnesses testified. At
the conclusion of the hearing, the hearing officer made sixty-nine specific findings of fact, in
addition to his analysis of the evidence, all of which implicate his assessment of the witnesses’
credibility. We are satisfied that those findings were entitled to deference by the Superior Court.
We therefore will proceed to give deference to the findings of facts, but review questions of law
de novo. See Durfee, 621 A.2d at 206.
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IV
Discussion
First, plaintiffs argue that the trial justice and hearing officer erred in concluding that DEM
was “per se” substantially justified because the initial complaint, filed in 1996, was not cited as a
basis for issuing the NOV, filed in 2006.6 DEM maintains that it was substantially justified
because it was investigating a complaint, acting under its statutory authority and duty. DEM notes
that the file opened when the NOIE issued in 1997 and had never been closed, and that, often, one
complaint leads to the next.
Second, plaintiffs argue that DEM was not substantially justified leading up to the filing of
the NOV as well as throughout the adjudicatory proceedings. The plaintiffs maintain that DEM
should have issued the NOV to DOT—and not plaintiffs—because of the evidence demonstrated
at the underlying adjudicatory proceeding, particularly with respect to the replacement of their
fifteen-inch-diameter pipe with DOT’s eighteen-inch-diameter pipe. The plaintiffs also argue that
DEM improperly issued the NOV based on water samples DEM knew could not support a legally-
viable claim. Last, plaintiffs contend that DEM had no basis to issue the two dismissed oil
violations.
DEM counters that it had a reasonable basis to believe plaintiffs were culpable in, or had
knowledge of, the drainage alteration. DEM points out that DOT’s involvement has no bearing
on whether DEM was substantially justified in bringing action against plaintiffs. Moreover, DEM
argues that it is not required to issue NOVs to every potentially responsible party. In response to
the failure to include an upstream water sample, DEM argues that the choice of the background
6
The trial justice, hearing officer, and parties refer to a situation where an investigation is initiated
by a complaint that the agency is statutorily charged with investigating as “per se” substantial
justification.
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water sample was one based on DEM’s technical expertise and a reasonable interpretation of the
regulation given the surrounding circumstances. Finally, DEM maintains that it was justified in
issuing the two oil pollution violations—plaintiffs’ alleged failure to immediately respond to the
oil discharge and failure to immediately report the violation to DEM—because DEM had reason
to believe plaintiffs were aware of the oil discharge before DEM notified plaintiffs of it.
A
Administrative Decision
This case comes to us under § 42-92-3(a) and § 42-92-5, where both the underlying
decision on the merits and fee determination were initially made at the agency level. Because the
hearing officer relied on the Merits Decision’s factual findings in his AAD EAJA Denial, a brief
summary of the pertinent portions of the Merits Decision provides the backdrop for our review.7
With respect to the issue of turbidity, the hearing officer starkly concluded that plaintiffs were
“victimized” by DOT, and that DEM, “[i]nstead of following up and holding [DOT] responsible
for its involvement[,]” charged only plaintiffs. In support of his conclusion, the hearing officer
referenced several “notes to file” submitted by DEM reflecting DEM’s awareness that DOT was
involved in the installation of the unauthorized eighteen-inch-diameter pipe. Carney testified that
DOT promised a letter explaining its involvement, but the letter never came.
The hearing officer further noted a letter to DOT from Harold Ellis, the Supervisor of the
Wetlands Compliance Section of OC&I, in which Ellis indicated that DEM had been advised that
the original fifteen-inch-diameter pipe had been replaced as part of the Route 7 reconstruction
project carried out by DOT. Ellis requested a response from DOT as to how the matter might be
7
We rely on the facts in the Merits Decision because we find it to include sufficient details as to
the evidence that DEM had before it when it decided to issue the NOV against plaintiffs. We
recognize that not all administrative hearings on the underlying merits will be as illuminative and
as helpful.
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resolved, but again DOT never responded. This correspondence from Ellis was the last action
taken by DEM until Naumann’s site inspection several years later in 2005. Significantly, the
hearing officer found that Naumann’s “visit was not the result of a complaint but a follow up
inspection while he was in the area on another complaint.”
The NOV with respect to turbidity was issued by DEM on November 6, 2006. Chopy
testified about DEM’s decision to charge plaintiffs with the violations relating to turbidity.
According to the Merits Decision, he said that he did not know who had changed the drainage
system “but assumed that [plaintiffs], as owners of the property, had either made the change or
consented to it.” When asked if he had read the numerous notes and correspondence indicating
that DOT “bore some or all of the responsibility[,]” his response often was that he probably had
read them but did not recall. The hearing officer allowed that “it is quite possible that Mr. Chopy
did not see all the evidence pointing to [DOT’s] involvement in this matter[,]” but he also noted
Chopy’s acknowledgment that DOT “often violate[s] environmental laws and regulations[.]”
The hearing officer, in the Merits Decision, ultimately concluded that DEM had not
sustained its burden of proof that plaintiffs had caused the increased sediment discharge and that
“the changes made to [plaintiffs’] drainage system were done by [DOT] without [plaintiffs’]
knowledge or consent.”
In light of these facts, when deciding plaintiffs’ EAJA request, the hearing officer
nonetheless concluded that DEM was substantially justified in initiating and pursuing its actions
against plaintiffs. The hearing officer first determined that DEM was entitled to substantial
justification because the underlying actions leading to and throughout the proceedings of the
Merits Decision were initiated by the December 3, 1996 complaint filed by a DOT employee. The
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hearing officer continued to find that, even without the complaint, DEM was substantially justified
because turbid water had been found emanating from plaintiffs’ property.
B
Superior Court Decision
In her decision, the Superior Court justice adopted the hearing officer’s determination that
DEM was substantially justified because a complaint had initiated DEM’s actions. The trial justice
likewise found DEM’s actions were substantially justified even if it was not acting in response to
a complaint. She reviewed the evidence in the Merits Decision regarding DOT’s involvement and
found that, during the proceedings, DEM “had reason to believe that [plaintiffs] were at least
partially involved in the alteration of the drainage structure.” The trial justice found DEM’s actions
rational “in determining that the owners of the [p]roperty were the reasonable parties for altering
the drainage.”
C
Substantial Justification
1
The EAJA provides, in pertinent part, that “[a]ny agency charged by statute with
investigating complaints shall be deemed to have substantial justification for the investigation and
for the proceedings subsequent to the investigation.” Section 42-92-2(2). Pursuant to G.L. 1956
chapter 17.1 of title 42, DEM is such an agency charged by statute with investigating complaints:
“The director of environmental management shall have the
following powers and duties:
“To issue and enforce such rules, regulations, and orders as may be
necessary to carry out the duties assigned to the director and the
department by any provision of law; and to conduct such
investigations and hearings and to issue, suspend, and revoke such
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licenses as may be necessary to enforce those rules, regulations, and
orders.” Section 42-17.1-2(19).
Section 42-92-4 of the EAJA instructs that “[a]ny agency authorized to conduct an
adjudicatory proceeding shall, by rule, establish uniform procedures for the submission and
consideration of applications for an award under this section.” Accordingly, DEM promulgated
rules to comply with the EAJA’s mandate. See 250 R.I. Code R. § 10-00-1.20.8 Those rules state
that a hearing officer “shall deny an award of litigation expenses to the petitioner if * * * the
Division was charged by statute with investigating a complaint, which led to the adjudicatory
proceeding.” 250 R.I. Code R. § 10-00-1.20(F)(2)(c).9
8
In full, Rule 1.20(A) states: “The purpose of this rule is to carry out the statutory requirements
contained in the [EAJA] which provides for the award of reasonable litigation expenses to
prevailing parties in certain adjudicatory proceedings conducted by state agencies.” 250 R.I. Code
R. § 10-00-1.20(A).
9
In full, Rule 1.20(F) states:
“1. Except as provided in § 1.20(F)(2) of this Part, the [hearing officer] shall award
reasonable litigation expenses to the petitioner if he or she finds that the record in
the case establishes by a preponderance of the evidence:
“a. That the petitioner is a party as defined in the R.I. Gen. Laws § 42-92-2(a);
“b. That the respondent has prevailed against the Division in the underlying
adjudicatory proceeding;
“c. That the Department instituted the underlying adjudicatory proceeding
without substantial justification; and,
“d. The amount of reasonable litigation expenses as defined in R.I. Gen. Laws
§ 42-92-2(c) which may include a recalculation of the expenses and a finding
that some or all of the litigation expenses qualify as reasonable litigation
expenses under the statute.
“2. The [hearing officer] shall deny an award of litigation expenses to the petitioner
if:
“a. The petitioner failed to meet the burden of proof established in § 1.20(F)(1)
of this Part;
“b. The Division was substantially justified in the actions leading to the
proceedings and in the proceeding itself; or,
“c. The Division was charged by statute with investigating a complaint, which
led to the adjudicatory proceeding.
“d. The [hearing officer] may, at his or her discretion, deny fees or expenses if
special circumstances make an award unjust.” 250 R.I. Code R. § 10-00-
1.20(F).
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While we recognize DEM’s authority to investigate complaints, the initial complaint in this
case was filed in 1996. DEM did not issue an NOV until 2006. Its preliminary investigation into
the cause of the turbid water seemed to dwindle to nothing; yet, had DEM followed up on its
investigation, it may well have included DOT as a party to the alleged violation. In the Merits
Decision, the hearing officer referenced Chopy’s testimony that DOT “has a history of not
complying with wetlands statutes and water quality statutes[,]” and that DEM “has issued dozens
and dozens of NOVs and informal notices” against DOT for various offenses. Chopy further
testified that DEM “attempted to investigate the involvement of [DOT] but never got a satisfactory
response.” According to the hearing officer, Chopy “said that if they had issued a[n] NOV to
[DOT] that they would have got to the bottom of it.” As the hearing officer ultimately concluded,
DEM knew or should have known of DOT’s involvement. Moreover, DEM only revived its action
against plaintiffs when a DEM site inspector visited the property as “a follow up inspection while
he was in the area on another complaint.”
Under these circumstances, we are not satisfied that there is a sufficient nexus between the
original complaint in 1996 and the NOV issued in 2006 to entitle DEM to the shield that it was
substantially justified in initiating and pursuing the administrative proceedings against plaintiffs.
Therefore, DEM’s actions did not warrant the blanket protection of substantial justification
afforded by § 42-92-2(2) and Rule 1.20(F)(2)(c).
2
The trial justice also found that, even if the NOV was not the direct result of a complaint,
DEM’s actions were nonetheless substantially justified. The trial justice reviewed the evidence
surrounding the water samples and found that “DEM’s investigation was not rendered
unreasonable by the lack of adequate background samples.” Deferring to the expertise and on-the-
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spot judgment required by the site investigator at the time, the trial justice concluded that, although
the hearing officer was correct in determining that the lack of a valid background sample rendered
the water samples “meaningless” at the adjudicatory hearing, the lack of a valid background
sample did not render DEM’s investigation “unreasonable.” Finally, regarding the oil pollution
violations, the trial justice concluded that DEM had a reasonable basis to believe that plaintiffs
would have known about an oil discharge before DEM’s discovery, particularly in light of
Smithfield Peat’s registration as a small-quantity generator of oil with the EPA.
Before this Court, plaintiffs argue that (1) at the time the NOV was filed, DEM knew and
had evidence that DOT was responsible for the pipe exchange which caused turbid water to
discharge; (2) DEM improperly issued the NOV against plaintiffs based on water samples it knew
could not support a legally viable claim; and (3) DEM had no basis to issue the two dismissed oil
pollution violations.
DEM argues that DOT’s culpability is irrelevant to the substantial justification inquiry, and
that, while DEM knew DOT was involved, DEM believed plaintiffs were also at fault. Moreover,
DEM argues that it is not required to issue NOVs to every potentially responsible party. For
example, as evidence of DEM’s belief that plaintiffs, too, might be responsible, DEM points to
testimony by Chopy that he was not aware DOT had replaced pipes on private property without
the landowner’s consent. DEM essentially argues that, because turbid water was discharging from
plaintiffs’ property, it was justified in issuing the NOV to plaintiffs.
This argument, however, glosses over what scant evidence DEM had at the time it issued
the NOV about both plaintiffs’ and DOT’s involvement. DEM was aware that DOT had a history
of ignoring environmental regulations. Chopy provided testimony that DEM issued the NOV not
because they had evidence that any of plaintiffs were responsible for the pipe change, but because
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Rollingwood was owner of the property.10 The hearing officer also noted that “consider[ing] the
length of time from the initial incident to the issuance of the NOV it is quite possible that Mr.
Chopy did not see all the evidence pointing to [DOT’s] involvement in this matter.” The fact that
an agency official might not review all the evidence before issuing a NOV is particularly troubling
and indicative of the very type of governmental abuse the EAJA is intended to remedy.
In response to plaintiffs’ background sample argument, DEM argues that it was reasonable
to pursue an investigation and rely on those samples even though the samples were inadequate to
support the NOV at the administrative hearing. To address the lack of background samples, DEM
focuses much on the reasonableness of the site inspector’s decision.
To support its contention that the allegation of oil pollution violations was justified, DEM
notes that the record indicates the oil had been discharging for two or three days before DEM
observed the release. This evidence, however, speaks only to the existence of the oil sheen and
not to the knowledge of plaintiffs, which is a key factor in DEM’s issuance of the violations for
failure to immediately respond and report. See 250 R.I. Code R. § 130-00-1.10.
With respect to the NOV concerning these alleged violations of the Rhode Island State
Water Pollution Act and DEM’s Water Quality Regulations, we are of the opinion that DEM was
not substantially justified in its actions leading up to the adjudicatory proceedings. As we have
explained supra, DEM knew or should have known of DOT’s involvement, and that DOT, not
plaintiffs, should have been held responsible. As the hearing officer concluded: “The discharge
10
The hearing officer summarized Chopy’s testimony on this point as follows: “He said that they
cited the [plaintiffs] because they are the property owners and presumably consented to the smaller
[sic] pipe being installed. He said that Smithfield Peat and Smithfield Crushing Co., LLC don’t
own the property but Rollingwood Acres, Inc. does. He has no information to support that the
[plaintiffs] consented to the installation of the pipe.” The hearing officer found that plaintiffs had
not given permission to DOT to alter the drainage structure and were not aware that DOT had
changed the drainage structure until the alteration was completed.
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[of silt] is due to the unauthorized changes made by [DOT].” DEM’s omission was its failure to
complete its investigation of DOT’s culpability, notwithstanding its knowledge that DOT had
routinely violated environmental laws and regulations. As a result, DEM resuscitated a long-
defunct investigation against plaintiffs, and ultimately charged them with five alleged water quality
violations for which they seemingly bore no responsibility.
In addition, those five alleged violations were based on water samples that were not taken
in accordance with DEM’s own water quality regulations. As the hearing officer found: “Without
a valid upstream sample all of [DEM’s] samples and testing on turbidity are meaningless.” While
we do not fault the site inspector’s on-the-spot judgment call regarding where to take the water
samples, nor would that alone tip the balance of our opinion on DEM’s substantial justification,
the lack of valid background samples is further evidence that DEM’s position was “shaky from
the start[.]” Sierra Club v. Secretary of Army, 820 F.2d 513, 520 (1st Cir. 1987).
Regarding the two oil pollution charges that DEM failed to prove by a preponderance of
the evidence, we also conclude that DEM was not substantially justified. The charges alleged that
plaintiffs failed to report the oil spill immediately and failed to begin containment and removal of
the oil immediately. The evidence adduced at the hearing on the merits disclosed that the presence
of a petroleum-based product was first discovered on the property by Naumann when he conducted
his inspection on February 9, 2005. The record is devoid of any evidence that plaintiffs were aware
of the contamination before that time. When notified of the problem, plaintiffs contacted Lincoln
Environmental, which responded to the property “while Mr. Naumann was still conducting his
initial investigation.” Thus, DEM was fully aware that plaintiffs had acted promptly to contain
the petroleum product, and it had no evidence that plaintiffs had any previous knowledge of the
- 21 -
oil discharge. We are satisfied that DEM has failed to show that it acted with substantial
justification with respect to those two charges.
V
Conclusion
Although we have determined that DEM acted without substantial justification in pursuing
various charges against the plaintiffs, we are mindful that it was another state agency, DOT, that
made the changes to the plaintiffs’ drainage system without the plaintiffs’ knowledge or consent.
DEM’s responsibility stems from its failure to fully investigate the cause of the turbid water on the
plaintiffs’ property when it knew or should have known of DOT’s involvement. It was DOT,
however, that precipitated the sediment discharge by replacing the fifteen-inch-diameter pipe with
the eighteen-inch-diameter pipe without the knowledge or consent of any of the plaintiffs and
without obtaining a permit from DEM. As a result, the plaintiffs have been embroiled in a twenty-
two-year saga somewhat reminiscent of the Hotel California (“You can check out any time you
like / But you can never leave!”).11 In the words of the hearing officer, the plaintiffs were
“victimized by [DOT].” We are convinced that this is the type of “unjust action[] by the state”
that the EAJA was designed to ameliorate. Section 42-92-1(b).
Notwithstanding the hearing officer’s ruling, as affirmed by the trial justice, that the
plaintiffs are not entitled to reasonable litigation expenses, he nevertheless made findings of fact
and conclusions of law on “the reasonability of the [plaintiffs’] litigation expenses to best present
a complete record in the event the matter is appealed.” Neither party takes issue with those findings
and conclusions. Accordingly, we quash the judgment entered on October 9, 2015, and remand
the record to the Superior Court with directions to enter a judgment in favor of the plaintiffs in the
11
Don Felder, Glenn Frey, Don Henley, Hotel California, on Hotel California (Asylum Records
1976).
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amount of $69,581.25 for attorneys’ fees, and in the amount of $5,628.75 for the stenographic
record. The trial justice, in her discretion, may also assess additional fees to compensate the
plaintiffs for the appellate portion of this controversy.
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STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS
SUPREME COURT – CLERK’S OFFICE
OPINION COVER SHEET
Rollingwood Acres, Inc. et al. v. Rhode Island
Title of Case
Department of Environmental Management et al.
No. 2015-328-M.P.
Case Number
(PC 14-1339)
Date Opinion Filed June 24, 2019
Suttell, C.J., Goldberg, Flaherty, Robinson, and
Justices
Indeglia, JJ.
Written By Chief Justice Paul A. Suttell
Source of Appeal Providence County Superior Court
Judicial Officer From Lower Court Associate Justice Netti C. Vogel
For Plaintiffs:
Joelle C. Rocha, Esq.
Attorney(s) on Appeal Michael A. Kelly, Esq.
For Defendants:
Susan B. Forcier, Esq.
SU‐CMS‐02A (revised June 2016)