## Facts

- A municipal authority operated a publicly owned treatment works (POTW) serving a Pennsylvania township.
- A dairy processing plant discharged industrial wastewater to the POTW under an Industrial User (IU) wastewater discharge permit with numeric limits on pollutants including biological oxygen demand (BOD) and total suspended solids (TSS).
- From July 1989 through April 1995, the plant repeatedly exceeded IU permit limits for BOD and TSS, resulting in more than 2,000 discrete permit-limit violations.
- The excessive loadings entered the POTW and were found to contribute to water quality problems in a creek receiving the POTW’s effluent.
- The plant knew of ongoing noncompliance and continued production at levels that generated unlawful discharges; it could have reduced production but did not.
- The plant delayed installing adequate pretreatment for more than two years while violations continued.
- In the remedial phase, the dispute centered on how to quantify “economic benefit” from noncompliance and how to set a penalty that would remove any gain and deter future violations.
- The court considered the subsidiary’s relationship to its parent corporation when evaluating ability to pay and the economic impact of a penalty, while assessing any penalty only against the subsidiary.

## Issues

1. How should a court calculate civil penalties under 33 U.S.C. § 1319(d) for thousands of IU permit violations over multiple years?
2. May “economic benefit” be measured by wrongful profits from operating at production volumes that caused permit exceedances, rather than only by avoided or delayed compliance costs?
3. May the court consider a parent corporation’s financial condition in assessing the economic impact of the penalty on the violator without imposing liability on the parent?

## Decision

- The court imposed a civil penalty of $4,031,000 for the IU permit violations under the Clean Water Act.
- The court accepted an “economic benefit” calculation based on wrongful profits attributable to noncompliant production levels.
- The court rejected a penalty methodology that began with the statutory daily maximum and adjusted downward, instead starting from the economic-benefit figure.
- The court added an additional amount for punishment and deterrence, resulting in a total penalty approximately equal to twice the quantified economic benefit.
- The court considered the parent’s financial information only to evaluate economic impact and ability to pay, while assessing the penalty against the subsidiary alone.
- The court rejected the argument that use of a wrongful-profits theory was procedurally unfair due to lack of notice.

## Legal Principles

- Under 33 U.S.C. § 1319(d), civil penalties must account for statutory factors including the seriousness of violations, economic benefit from noncompliance, and the economic impact of the penalty on the violator.
- “Economic benefit” may be measured by wrongful profits earned by continuing operations at unlawful production levels; it is not limited to avoided or delayed capital and operating costs.
- A penalty may be structured to remove economic benefit and add a punitive component sufficient to deter future violations so the sanction is not merely a cost of doing business.
- In assessing economic impact and deterrence, a court may consult parent-company financial information when closely related to the violator’s ability to pay, while still imposing the penalty only on the liable entity.

## Conclusion

The court imposed a $4.031 million Clean Water Act civil penalty for thousands of IU permit exceedances, holding that economic benefit may be measured by wrongful profits from noncompliant production volumes and that parent financial data may be considered to gauge economic impact without transferring liability to the parent.


United States v. Mun. Auth. of Union Twp., 929 F. Supp. 800 (M.D. Pa. 1996)