It is rare that a high court gets into the weeds of an agency's
interpretation of its own technical rules. Once authority has been
properly delegated to an agency, courts generally defer to that
agency's decisions and administrative rulings. So it was somewhat
unusual when this past September the Massachusetts Supreme Judicial
Court (SJC), on its own motion, transferred Franklin Office
Park Realty Corp. v. Comm'r of DEP, 466 Mass. 454 (2013) to
itself, and issued an opinion that clarified the Department of
Environmental Protection's (DEP) long-standing interpretation of
its own administrative penalty statute.
At issue was when the agency may bypass the usual pre-penalty
notice requirement for environmental violations that qualify as
"willful and not the result of error" and the exact meaning of
"willful" in this context. The Administrative Penalties Act
(M.G.L.c. 21A, §16) provides six exceptions to the requirement that
a penalty may not be imposed without notice. The "willfulness
exception" is one of those six exceptions.
Facts and Case History
In Franklin, DEP asserted that Franklin Office Park, via
its president and licensed construction supervisor, as agents,
committed various violations in connection with the removal and
disposal of asbestos-containing roof shingles. DEP assessed a
penalty of $18,225 for these violations, without issuing Franklin a
notice of violation with an opportunity to cure. After a DEP
administrative hearing upheld the pre-notice penalty, Franklin
sought judicial review, and a Superior Court judge determined that
the DEP's interpretation of M.G.L.c. 21A, §16 was unreasonable and
thus not entitled to deference. DEP then appealed, and the SJC took
the case up on its own motion.
DEP argued that Franklin's failure to comply fell within the
willfulness exception because it was willful and not the result of
error, which the agency had long interpreted as requiring only a
showing of "intent to do an act that violates the law if done." DEP
has historically held that no showing of knowledge of either the
operative facts underlying the violation, or the law, was required
to show willfulness.
Franklin, in turn, contended that it acted in good faith and
without knowledge of the law and a motive to violate the law. It
claimed that neither Franklin, its principal nor its independent
roofing contractor had reason to know or suspect that the roof
shingles contained asbestos. Franklin argued that an action is only
willful if the person knew the act was illegal at the time it was
committed.
Supreme Judicial Court's Interpretation
The court reviewed the statutory language in light of the purpose
of the Administrative Penalties Act. It found that the Legislature
intended a "willful" violation of DEP's laws to be a violation that
has been committed by a party who knew or, due to his experience or
expertise, should have known the operative facts that made his
actions a violation of the law. Because it found that the
Legislature "has spoken with certainty on the topic," the court
rejected DEP's interpretation requiring no knowledge of operative
facts on Franklin's part. The court concluded that the willfulness
exception in M.G.L.c. 21A, §16, requires that the violator had
intentionally undertaken the act that caused the violation, and
that the violator either knew or should have known at least the
facts that made the act a violation of the law. Having said that,
the court stated that there is no requirement that a violator
either be aware of the applicable environmental laws or intend to
violate those laws.
In Franklin, the operative fact was that the shingles
at the site likely contained asbestos. The DEP hearing officer held
that Franklin's property manager and roofing contractor should have
known that the roofing shingles being removed likely contained
asbestos because of their industry knowledge, experience, and
professional licensure. The court, while interpreting the statute,
also affirmed DEP's penalty without prior notice and found it
properly rested on the hearing officer's findings that Franklin
knew or should have known of the likely presence of asbestos in the
shingles.
Although it upheld the pre-notice penalty, the court found that
DEP's decision in the case was based on an error of law because the
agency's interpretation of the willfulness exception did not
comport with the clear meaning of the statute. The court opined
that DEP's interpretation was "unreasonable" because it "sweeps so
broadly as to make nearly all conduct subject to penalty without
notice."
Impact on Future Environmental Penalty
Cases
The Franklin holding will likely have ramifications for
many future DEP penalty cases. The court has narrowed DEP's
definition of willfulness and clarified how future environmental
penalty cases may be interpreted. We can expect that courts may
excuse a violator's mistake of operative fact, but not a violator's
mistake of law. We can expect that the operative facts of each case
will likely be closely examined. And we can expect that DEP must
show that the violating party "knew or should have known of the
operative facts that made their acts unlawful."
Although the definition has narrowed somewhat, courts may still
have the opportunity to wade into the weeds of the operative facts.
The court's reference to the "should have known" standard allows
room for an argument that even if a party did not willfully violate
the law, that party may still be liable because he should have
known that his acts would violate the law. In
Franklin, the court concluded that Franklin's property
manager and roofing contractor should have known that the roof
shingles contained asbestos because of their industry knowledge and
experience, a notation on the building permit requiring compliance,
and the licensed construction supervisor status of the building
manager.
In addition to informing future environmental penalty cases, the
Franklin holding provides good guidance to property owners
and real estate contractors, who would be wise to stay vigilant and
exercise due care. Ignorance of the law will be no defense; even if
property owners claim ignorance of the facts, knowledge may be
imputed to them via their professional contractors and agents.