## Facts

- Dean Dairy Products, Inc. operated a milk-processing plant in Union Township, Pennsylvania and discharged wastewater to the township’s publicly owned treatment works under an industrial user pretreatment permit.
- From July 1989 through 1994, Dean Dairy repeatedly exceeded permit limits, particularly for Biological Oxygen Demand (BOD) and Total Suspended Solids (TSS), contributing to degradation of Kishacoquillas Creek.
- The district court found Dean Dairy committed 1,754 distinct permit violations during the period and continued violating after the United States filed suit.
- Dean Dairy evaluated compliance options, including reducing production by dropping a major customer (PennMaid), but declined because doing so would reduce earnings.
- Although Dean Dairy paid higher usage fees to the treatment works during noncompliance, the district court found it gained financially by maintaining higher production volumes than compliance would have allowed.
- Using Dean Dairy’s estimate of lost earnings if it dropped PennMaid ($417,000 in 1994) and extrapolating across the violation period, the district court found an economic benefit of approximately $2,015,500.

## Issues

1. Whether “economic benefit” under 33 U.S.C. § 1319(d) may be measured by avoided lost profits from production reductions necessary to comply, even where the violator also incurred increased operating costs (e.g., higher user fees).
2. Whether the district court abused its discretion in imposing a $4,031,000 civil penalty by starting with the economic benefit and doubling it for punishment and deterrence, while considering the statutory penalty factors.

## Decision

- The Third Circuit affirmed the district court’s judgment and penalty.
- The court held that the district court permissibly treated avoided profit-reducing measures (foregone production cutbacks) as an “economic benefit” of noncompliance under § 1319(d).
- The court held that increased costs during the violation period did not negate the existence of an economic benefit where the violator obtained a net advantage by continuing noncompliant production.
- The court held that the $4,031,000 penalty—well below the statutory maximum—was within the district court’s discretion after considering statutory factors, including seriousness, duration, compliance history, good-faith efforts, and economic impact.

## Legal Principles

- Under the Clean Water Act’s civil-penalty provision, “economic benefit (if any) resulting from the violation” is not limited to avoided or delayed capital and compliance expenditures; it may include profits preserved or increased by avoiding production limits or other operational constraints required for compliance.
- A district court has broad discretion to select a penalty methodology so long as it considers the statutory factors and stays within the statutory maximum; the statute does not require a specific formula.
- A penalty may reasonably (1) remove the violator’s economic gain from noncompliance and (2) include an additional amount to deter future violations, including by using a multiplier tied to the economic-benefit figure.
- In assessing “other matters as justice may require” and economic impact, a court may consider the violator’s financial condition and, where relevant to the compliance decision-making and benefit, the resources and role of a parent company.

## Conclusion

The Third Circuit upheld a substantial Clean Water Act civil penalty where the violator’s economic benefit was calculated from avoided lost profits associated with production cuts that would have been required to comply, and it approved the district court’s discretionary approach of doubling that benefit to ensure deterrence after weighing the statutory penalty factors.


United States v. Mun. Auth. of Union Twp., 150 F.3d 259 (3d Cir. 1998)