United States v. Acquest Transit LLC

UNITED STATES OF AMERICA, Plaintiff, v. ACQUEST TRANSIT LLC, et al., Defendants.

09-CV-55S

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK

March 3, 2021

DECISION AND ORDER

I. INTRODUCTION

This is a 2009 Clean Water Act case arising from 2007 disposal of fill from Defendants' property (containing purported wetlands) allegedly into "waters of the United States." The underlying issue is whether that property contained wetlands that are part of "waters of the United States" to be governed by the Clean Water Act's edicts. That phrase "waters of the United States" is a regulatory term of art under Clean Water Act regulations that has changed since the commencement of this action. This case is scheduled for trial in September 2021 (Docket Nos. 354, 369). Prior to trial, the parties raise issues arising from the retroactivity of the recent change in the definition of that phrase and bifurcation of liability and penalty phases in this action.

Presently before this Court are (1) the Government's argument that the Navigable Waters Protection Rule (enacted in 2020) only applies prospectively and does not affect this case (Docket No. 363); (2) Defendants' Motion to Dismiss on jurisdictional grounds (Docket No. 365), resting (in part) on the retroactive application of the Navigable Waters Protection Rule; and (3) the Government's contention that trial of this case has to be split, with the liability portion tried before a jury separately from the penalty phase (if warranted) before this Court because Defendants seek a jury trial (Docket No. 364).

For future reference in this Decision and Order (and as applied in the Decision and Order of June 4, 2020, Docket No. 349, 2020 WL 3042673) some of the common shorthand, abbreviations, and acronyms used in herein include:

Acquest, Acquest Transit, LLC;

Army Corps, U.S. Army Corps of Engineers;

CWA, Clean Water Act (or the "Act");

EDI, Earth Dimension, Inc.

EPA, Environmental Protection Agency;

NWPR, U.S. Envtl. Prot. Agency & U.S. Army Corps of Eng'r, The Navigable Waters Protection Rule: Definition of "Waters of the United States", 85 Fed. Reg. 22250 (Apr. 21, 2020) (effective June 22, 2020), codified at 33 C.F.R. § 328.3 (2020) (or the "Rule");

Site, Town of Amherst Tax Parcel No. 16.00-5-23 (R&R, 2018 WL 3861612, at *4);

TNW, Traditional Navigable Waterway.

Prior Decisions and Orders cited herein include:

Docket No. 26, Decision and Order of July 15, 2009, 2009 WL 2157005; R&R, Docket No. 334, Report and Recommendation, 2018 WL 3861612 (Foschio, Mag. J.)

Docket No. 349, Decision and Order of June 4, 2020, 2020 WL 3042673.

Familiarity with these Decisions is presumed. These Decisions will be referenced by their Westlaw citations.

For the reasons stated below, Defendants' Motion to Dismiss (Docket No. 365) Counts One and Three is denied. The NWPR does not apply to this action and the alleged activities of 2007 because of its June 2020 effective date. The trial of this case is bifurcated, with liability conducted before a jury trial and any penalty phase handled by this Court if any Defendant is held liable by the jury.

II. BACKGROUND

A. Facts

The following facts are drawn from the Amended Complaint (Docket No. 112) and the uncontested facts found by Magistrate Judge Foschio in the Report (R&R, 2018 WL 3861612), as later noted and accepted by this Court in the Decision and Order of June 4, 2020 (Docket No. 349, 2020 WL 3042673).

On January 9, 2009, the Government commenced this action against Acquest for violations of the Clean Water Act, 33 U.S.C. §§ 1251, 1311, 1319(d), for engaging in ditch digging, earthmoving, and fill activities on the Site (R&R, 2018 WL 3861612, at *1, 6). The Government moved for preliminary injunction (Docket No. 6), which was granted (Docket No. 26, 2009 WL 2157005). There, this Court found that the Government "had demonstrated sufficiently that the Property's wetlands are 'waters of the United States' within the CWA's jurisdiction" for the preliminary injunction (2009 WL 2157005, at *8).

1. The Amended Complaint (Docket No. 112)

The Amended Complaint, filed on April 6, 2011 (Docket No. 112), added as Defendants Acquest Development, LLC (allegedly the corporate developer and manager of the Site), and William L. Huntress (principal of Acquest and president and managing partner of Acquest Development, LLC) (id. ¶¶ 8, 9).

Count One of the Amended Complaint alleged that Defendants violated the Clean Water Act, 33 U.S.C. § 1311, by discharging dredge or fill materials into jurisdictional wetlands at the Site without a permit (id. ¶¶ 45-53). Count Two alleged that Defendants violated 33 U.S.C. § 1362(12) by discharging stormwater associated with industrial activity from point sources into waters of the United States without a permit (id. ¶¶ 54-63).Count Three claimed that Defendants violated CWA, 33 U.S.C. § 1319, by continuing to discharge pollutants into jurisdictional wetlands in contravention of the Environmental Protection Agency's administrative Cease and Desist Order (id. ¶¶ 64-67).

2. The Site and Clean Water Act

The Site is in three 100-year floodplains since three creeks are nearby (R&R, 2018 WL 3861612, at *4). Magistrate Judge Foschio recounted the ownership for the Site from 1978 to defendants' acquisition in 2005 (id., 2018 WL 3861612, at *4; see Docket No. 349, Order, 2020 WL 3042673, at *5).

Defendants purchased the Site from Realmark Properties in June 2005 with the price initially contingent upon the percentage of the property deemed wetlands (R&R, 2018 WL 3861612, at *5; Docket No. 349, Order, 2020 WL 3042673, at *5). On October 2005, defendants retained a wetlands consultant, Earth Dimensions, Inc., to delineate the wetlands boundaries. EDI found 77.02 acres or 80% of the Site's 96.3 acres were wetlands that appear to be connected with waters of the United States, specifically Ransom Creek, Tonawanda Creek, and the Niagara River. (R&R, 2018 WL 3861612, at *5.)

From 2006 to 2008, Defendants contracted to clear the Site of vegetation, clear existing ditches, deepen and widen ditches, including ditches that ran in identified wetlands. Defendants redeposited this cleared material in the wetlands on the Site (id., 2018 WL 3861612, at *5). In 2006 and 2007 defendants also applied for Clean Water Act § 402 permits for stormwater discharges (id., 2018 WL 3861612, at *5) for work the Government contends required §§ 402 and 404 permits (id. at *6).

In February 21, 2008, the EPA issued a Cease and Desist Order upon defendants to cease all earth moving work, filling, grading, or excavation on the Site without the requisite § 404 permits pending determination by the United States Army Corps of Engineers whether the Site was jurisdictional wetlands (id.; see Docket No. 375, Defs. Reply Memo. at 10-11, 11 n.4, Ex. A (Feb. 21, 2008, cease and desist order); see also Docket No. 9, Gov't Ex. 4, David Pohle Decl. Ex., copy of Feb. 21, 2008, cease and desist order)). On March 19, 2008, the Army Corps designated Ransom Creek a Traditional Navigable Waterway (R&R, 2018 WL 3861612, at *6); hence this made adjoining wetlands fall under federal jurisdiction of the Clean Water Act to require permits for discharge therein, 33 U.S.C. §§ 1342,1344.

Inspections under a Search Order on July 28, 2008, revealed violations of the first Cease and Desist Order due to ongoing excavations (id., 2018 WL 3861612, at *6). This EPA inspection team also took soil samples which led the agency to conclude that wetlands were present on the entire Site. The EPA also found 13.3 acres of fill were deposited in violation of the CWA. (Id.). This inspection team also found that these wetlands

"abut and maintain a continuous surface connection with the West Ditch [one of the three original ditches on the Site] from which water flows at least three seasons into the Millersport Highway East Side Ditch, underneath Millersport Highway, into the Millersport Highway West Side Ditch, and into Ransom Creek, then to Tonawanda Creek and the Niagara River,"

(id., 2018 WL 3861612, at *6, 5). The EPA, on September 5, 2008, issued a second Cease and Desist Order prohibiting further earth moving activities (id., 2018 WL 3861612, at *6), but on September 10 and 16, 2008, the Army Corps observed further earth-moving activities on the Site (id.).

B. Procedural History

The Government amended its Complaint (Docket No. 112). Defendants answered the Amended Complaint (Docket No. 121) and later moved for summary judgment (Docket No. 267), contending that permits under the Clean Water Act were not required for their activities on the Site (id., Defs. Memo. at 2-4, 11-15, 17-22). Defendants argued that the Clean Water Act, EPA, and Army Corps regulations regarding wetlands are of "indecipherable vagueness and mind-boggling complexities" (id. at 4, 6-7, 14-17). They posed the question whether the CWA regulations were clear and unambiguous in establishing that the Site contained jurisdictional wetlands, whether they were part of the "waters of the United States" (id. at 5).

The Government also moved for summary judgment as to liability (Docket No. 269), arguing that Defendants violated the Act by discharging pollutants into the "waters of the United States" by polluting the wetlands on the Site (id. at 15-35).

In a comprehensive Report and Recommendation, Magistrate Judge Foschio recommended denial of Defendants' motion (R&R, 2018 WL 3861612, at *25-26, 35-36, 37), and the grant of a portion of the Government's Motion for Summary Judgment (id. at *26-27, 27-35, 37). On the objections to the Report & Recommendations (Docket Nos. 337, 338, 339, 340), this Court found issues of fact establishing whether the Site contains "waters of the United States." This Court applied Justice Kennedy's concurrence in Rapanos v. United States, 547 U.S. 715, 780, 126 S.Ct. 2208, 165 L.Ed.2d 159 (2006) (Kennedy, J., concurring), and his significant nexus standard in construing the definition "waters of the United States" in this case (...