Franklin Office Park Realty Corp. v. Commissioner of the Department of Environmental Protection (Lawyers Weekly No. 10-172-13)

DUFFLY, J.  The plaintiff, Franklin Office Park Realty Corp. (Franklin), challenges the assessment of a penalty in the amount of $ 18,225, imposed by the Department of Environmental Protection (DEP) for improper handling and disposal of roof shingles that contained asbestos.  Franklin argues that, pursuant to G. L. c. 21A, § 16 (administrative penalties act), it was entitled to a notice of noncompliance and the opportunity to cure any violations before a penalty was imposed.  The commissioner of the DEP (commissioner) accepted the recommendation of a hearing officer that he affirm the penalty on the ground that Franklin’s failure to comply fell within one of six exceptions to the notice requirement because it was “willful and not the result of error” (wilfulness exception), see G. L. c. 21A, § 16, which he interpreted as requiring only a showing of “the intent to do an act that violates the law if done.”  Franklin sought judicial review pursuant to G. L. c. 30A, § 14; a judge of the Superior Court determined some of the facts found by the hearing officer to be unsupported by substantial evidence, and that the DEP’s interpretation of G. L. c. 21A, § 16, was unreasonable and thus not entitled to deference.  DEP appealed, and we transferred the case to this court on our own motion.

We conclude that the language “willful and not the result of error” in G. L. c. 21A, § 16, when considered in the context of the statutory scheme and the Legislature’s intent, clearly requires a showing that the party who has not complied with the law knew or should have known of the operative facts that made their acts unlawful.  The DEP’s decision in this case was based on an error of law because its interpretation of the wilfulness exception does not comport with the clear meaning of the statute.  However, the hearing officer also found that Franklin knew or should have known of the likely presence of asbestos in the shingles.  Based on those findings of fact, we conclude that Franklin’s conduct was wilful and not the result of error within the meaning of the administrative penalties act.  Therefore, the judgment of the Superior Court must be reversed.  As permitted by G. L. c. 30A, § 14, the DEP’s decision to the extent that it rests on the hearing officer’s findings that Franklin knew or should have known of the likely presence of asbestos in the shingles is affirmed and, on that basis, the DEP’s imposition of a penalty without prior notice of noncompliance is affirmed.

Background and prior proceedings.  Among other environmental protection statutes, the DEP administers and enforces the Massachusetts Clean Air Act, G. L. c. 111, §§ 142A-142O (Clean Air Act).  See Box Pond Ass’n v. Energy Facilities Siting Bd., 435 Mass. 408, 422 n.13 (2001); G. L. c. 111, § 142A.  The DEP assessed administrative penalties against Franklin for its violations of the Clean Air Act, without first providing written notice of noncompliance as set forth in G. L. c. 21A, § 16.

We summarize the hearing officer’s findings of fact.  “We do not make a de novo determination of the facts or draw different inferences from the facts found by the agency.”  Vaspourakan, Ltd. v. Alcoholic Beverages Control Comm’n, 401 Mass. 347, 351 (1987), citing Southern Worcester County Regional Vocational Sch. Dist. v. Labor Relations Comm’n, 386 Mass. 414, 419‑420 (1982).  See G. L. c. 30A, § 14 (5).

Franklin has no employees.  It owns a piece of property in the town of Mendon, purchased in October, 2008, containing a three-family home and a commercial garage (site).  Kevin P. Meehan is the president, treasurer, and sole shareholder of Franklin.  Through various entities, Meehan also owns more than thirty other properties, consisting primarily of commercial sites.  In addition, he owns Meehan Realty Management (MRM), which maintains the properties, as well as three automobile dealerships.

Shortly after Franklin purchased the site, Meehan became aware of a leak in the roof of the three-family home, and determined that the roof shingles needed to be replaced.  He asked Jonathan Orton, an MRM employee who held a Massachusetts construction supervisor’s license, to locate a roofer.  Orton sought recommendations from a former MRM employee, Emanuel Jordao, and Meehan engaged F&G Roofing and Siding (F&G) based on Jordao’s recommendation.  F&G agreed to remove the existing shingles and replace them with new asphalt shingles, which were to be provided by MRM.  Orton secured from the town of Mendon a building permit requiring that the work comply with the State building code as well as with the requirements of DEP and the United States Environmental Protection Agency.  Jordao asked New England Recycling (NER) to provide a “roll-off” container to store construction debris; the company was to deliver the container and, following completion of the project, to dispose of the debris.  NER was not certified to dispose of asbestos-containing materials.

The project was completed by November 25, 2008, when NER retrieved the container from the site.  When the container arrived at NER’s facility, NER employees suspected that the materials contained asbestos.  An NER employee informed an MRM employee by telephone that NER could not dispose of the shingles because they contained asbestos.  NER sealed the container and returned it to the Franklin site.  Upon receiving this information, Meehan promptly called an environmental manager and arranged to have the shingles properly sealed, labeled, and disposed of as required by DEP regulations.  Meehan asked that the project be expedited, making it more expensive.  A DEP environmental analyst inspected the container at the site and observed that it “contained friable asbestos” that was neither sealed nor labeled.  DEP then issued a penalty assessment notice to Franklin.

The hearing officer imputed Orton’s knowledge to Meehan, and the knowledge of both men to Franklin; he concluded that Orton and Jordao were acting as agents for the benefit of Franklin, and that, through them, Franklin exercised control over the roof replacement project.  As to the knowledge of Orton and Meehan, the hearing officer specifically found that:

“Mr. Orton and Mr. Meehan knew or should have known that the roofing shingles and other roofing materials could contain asbestos.  They would have discovered such asbestos had they performed due diligence prior to commencing their project to remove and replace the roof.  I make these findings based upon:  (1) the evidence regarding [Meehan’s and Orton’s] industry knowledge and experience, (2) the notation at the bottom of the building permit requiring compliance with DEP and EPA requirements, [and] (3) Mr. Orton’s and Mr. Meehan’s professional backgrounds and experiences, particularly Mr. Orton’s status as a licensed Construction Supervisor . . . .”  (Emphasis added.)

The hearing officer affirmed the penalty assessment in the amount of $ 18,225, explaining that Franklin’s actions fell within DEP’s interpretation of the wilfulness exception:

“[DEP] also asserts that under the longstanding interpretation of ‘willful and not the result of error’ it does not matter whether Franklin knew the shingles contained asbestos.  I agree with [DEP]. . . .  In any event, I have found that Franklin knew or should have known that the shingles could contain asbestos and that due diligence would have disclosed the asbestos.”

Discussion.  The DEP argues that the meaning of “willful and not the result of error,” in G. L. c. 21A, § 16, is ambiguous, and therefore, that its interpretation of the statute is entitled to deference.  The DEP looks primarily to its adjudications as reflecting the agency’s interpretation that knowledge of operative facts is not required before a penalty may be assessed without notice.

In reviewing the validity of policies adopted by decision making of an administrative agency tasked with implementing and enforcing State statutes, we employ the two-step test used to determine whether regulations promulgated by an agency are valid.  See Board of Appeals of Woburn v. Housing Appeals Comm., 451 Mass. 581, 592-593 (2008).  First, we use “conventional tools of statutory interpretation” to determine “whether the Legislature has spoken with certainty on the topic in question.”  Goldberg v. Board of Health of Granby, 444 Mass. 627, 632–633 (2005) (Goldberg).  If we conclude that a statute is unambiguous, we will reject any interpretation by an agency that does not give effect to the Legislative intent, see Massachusetts Hosp. Ass’n, Inc. v. Department of Med. Sec., 412 Mass. 340, 346 (1992), and set aside or modify the agency’s decision because it is “[b]ased upon an error of law.”  G. L. c. 30A, § 14.  It is only where the Legislature has not directly addressed the issue that we proceed to determine whether the agency’s interpretation is reasonable, granting “substantial deference” to that agency’s particular expertise, see Goldberg, supra at 633.  In this second step, we will disturb an agency’s interpretation of its statutory mandate only if it is “patently wrong, unreasonable, arbitrary, whimsical, or capricious.”  Brookline v. Commissioner of the Dep’t of Envtl. Quality Eng’g, 398 Mass. 404, 414 (1986), quoting Arthur D. Little, Inc. v. Commissioner of Health & Hosps. of Cambridge, 395 Mass. 535, 553 (1985).

Here, we do not reach the second step because, relying on ordinary rules of statutory construction, we can discern readily the Legislature’s intent as to when a violation of environmental protection laws is “willful and not the result of error.”  Because the language is not ambiguous, the DEP’s interpretation as reflected in its adjudications is not entitled to the substantial deference that would be due if the language were unclear.  See Goldberg, supra (where statute is ambiguous, “substantial deference” extended to agency charged with primary responsibility for its administration, due to agency’s particular expertise).

When called upon to interpret statutory language, we look “to the intent of the Legislature ascertained from all its words construed by the ordinary and approved usage of the language, considered in connection with the cause of its enactment, the mischief or imperfection to be remedied and the main object to be accomplished, to the end that the purpose of its framers may be effectuated.”  Boston Police Patrolmen’s Ass’n, Inc. v. Boston, 435 Mass. 718, 719‑720 (2002), quoting O’Brien v. Director of the Div. of Employment Sec., 393 Mass. 482, 487-488 (1984).  Although “willful and not the result of error” is not specifically defined in G. L. c. 21A, § 16, “[a]id in arriving at the meaning of the word ‘willfully’ may be afforded by the context in which it is used.”  United States v. Murdock, 290 U.S. 389, 395 (1933).  See Spies v. United States, 317 U.S. 492, 497 (1943).

The purpose of the administrative penalties act was to provide a mechanism for routine enforcement, with a focus on correction; the act responded to a concern that minor violations of environmental law had been left uncorrected and unpunished because, where violators did not respond to a notice of noncompliance from the DEP, cases had to be referred to the Attorney General for enforcement through costly judicial action.  See D.L. Connors & M.E. Samuels, Plugging the Holes in Environmental Enforcement:  The Massachusetts Administrative Penalties Act, in Important New Developments with Respect to Environmental Law 563 (Mass. Cont. Legal Educ. 1987) (New Developments).  The enforcement mechanism provided by the administrative penalties act is two-tiered:  the general rule is that a party will receive notice of a violation and the opportunity to correct it before any penalty is imposed.  Id. at 569.  However, if a party’s conduct or the scope of impact of a violation fits within one of six exceptions to the notice rule, a penalty may be imposed without such notice.  Id. at 569-570.  According to a 1986 DEP guidance document, created soon after G. L. c. 21A, § 16, was enacted in 1985, this structure was intended to serve two fundamental legislative goals:  “to catch and correct small problems before they become large ones,” and to “deter and prevent violations before they happen by sending the message that violating the law will be more costly than obeying the law.”  See Comprehensive Enforcement Policies and Guidelines XI-A (1986) (comprehensive guidelines), as reprinted in New Developments, supra at 647.

Words grouped together in a statute must be read in harmony, and we are not free to interpret the wilfulness exception in a way that makes it exceptionally broader than its neighbors.  See Commonwealth v. Brooks, 366 Mass. 423, 428 (1974) (“words in a statute must be considered in light of the other words surrounding them”), citing Animal Rescue League of Boston v. Assessors of Bourne, 310 Mass. 330, 333 (1941); Commonwealth v. John T. Connor Co., 222 Mass. 299, 302 (1915) (“the scope of doubtful words may be ascertained by reference to the operation of other associated words”).  See also 2A N.J. Singer & J.D. Shambie Singer, Sutherland Statutory Construction § 47:16, at 352–353 (7th ed. 2007) (describing interpretive maxim of “noscitur a sociis,” i.e., “it is known from its associates”).  Cf. Commonwealth v. Scott, 464 Mass. 355, 359 (2013) (severity of “impairment” necessary to constitute serious bodily injury within meaning of statute best understood in context of statute’s other clauses, which allow finding of serious injury where there was “permanent disfigurement” or “substantial risk of death”).

In addition to the wilfulness exception, the DEP may forgo notice and assess a penalty if the violation was “part of a pattern of noncompliance and not an isolated instance”; “resulted in significant impact on public health, safety, welfare or the environment”; consisted of the unauthorized disposal or release of hazardous waste, or the unauthorized release of oil; involved a false or misleading statement on a form submitted to the DEP; or otherwise consisted of a failure to comply with agreements with the department to remedy or prevent violations.  G. L. c. 21A, § 16.  These exceptions address conduct that the actor knew to be violative (e.g., because the actor had previously transgressed), or that may have a significant impact on health or the environment, omitting routine and small-scale violations.  The conduct is egregious either because it reflects a knowing disregard for agreements or environmental rules, or because the harm posed by such conduct is extraordinary.  See id.; note 1, supra.

Although “willful” may have several meanings when read in isolation, its meaning in any particular statute may be determined from examining the act itself as well as the larger statutory scheme.  See United States v. Murdock, supra.  When viewed in the context of the administrative penalties act and the purpose of its enactment, it is apparent that the Legislature intended a “willful” violation of the environmental protection laws administered by the DEP 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.  Here, the operative fact was that the shingles at the site likely contained asbestos.  Because the Legislature “has spoken with certainty on the topic,” Goldberg, supra at 632–633, we reject the DEP’s interpretation, which requires no such knowledge, as “contrary to the plain language of the statute and its underlying purpose.”  Smith v. Commissioner of Transitional Assistance, 431 Mass. 638, 646 (2000).

The statute as a whole is not “capable of more than one rational interpretation.”  See Biogen IDEC MA, Inc. v. Treasurer & Receiver Gen., 454 Mass. 174, 187 (2009).  The rule advanced by DEP in the decision accepted by the commissioner is unreasonable because it fails to consider the other exceptions set forth in G. L. c. 21A, § 16, and because it sweeps so broadly as to make nearly all conduct subject to penalty without notice.  Cf. DiFiore v. American Airlines, Inc., 454 Mass. 486, 490‑491 (2009) (“our respect for the Legislature’s considered judgment dictates that we interpret the statute to be sensible, rejecting unreasonable interpretations unless the clear meaning of the language requires such an interpretation”).  The structure of the statute, which begins with the general rule and its exceptions, indicates that the Legislature intended that most violators receive notice prior to the assessment of a penalty; the DEP’s interpretation excuses the giving of notice to anyone except persons whose actions were entirely accidental.  “A basic tenet of statutory construction requires that a statute be ‘construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous.’”  Wolfe v. Gormally, 440 Mass. 699, 704 (2004), quoting Bankers Life & Cas. Co. v. Commissioner of Ins., 427 Mass. 136, 140 (1998).  Because the DEP’s interpretation would come close to making all violators strictly liable for the payment of penalties without notice, it is inconsistent with the clear intent of the Legislature.

Support for this interpretation is also found in the DEP’s implementation of the act.  Although its current interpretation is incorrect, see note 9, supra, its initial interpretation, as expressed in policy documents and in early decisions, aligned with what we conclude is the intent of the statute.  See Commissioner of Revenue v. SCA Disposal Servs. of New England, Inc., 383 Mass. 734, 737‑738 (1981) (nearly contemporaneous administrative interpretation of ambiguous statute is entitled to weight in construing it).  In 1988, the DEP first adopted in a published decision the interpretation of the wilfulness exception that it had developed in the 1986 comprehensive guidelines.  The comprehensive guidelines provide as examples of when a violation might be considered wilful the filing of a report “which the reporting party must have known was inaccurate”; intentionally filling or altering wetlands; violating the terms of a prior agreement with the agency; and “failing to notify [DEP] of asbestos demolition work.”  Comprehensive guidelines, supra at X1-B(2), as reprinted in New Developments, supra at 652.  Although the latter example does not state whether the violator must be aware of the facts that make his intentional acts a violation — i.e., that the structure being demolished contains asbestos — the other examples in the guidance document support the conclusion that such knowledge was contemplated and is necessary to make a violation wilful.

We conclude that the wilfulness exception in G. L. c. 21A, § 16, requires that the violator have undertaken intentionally 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.  That being said, there is no requirement that a violator either was aware of the applicable environmental laws or intended to violate those laws.  See note 14, supra.  See also Commonwealth v. Belanger, 30 Mass. App. Ct. 31, 33 (1991) (“We also understand the practical difficulty an employer may have in finding the way to and through the statutes of Massachusetts. . . . That difficulty, however, is not peculiar to the statutory scheme in question but pertains to the whole vast underbrush of statutes and regulations which govern the lives of the inhabitants of the Commonwealth or the country”).

Review under G. L. c. 30A, § 14.  On review of an agency decision, a court may “affirm the decision of the agency, or remand the matter for further proceedings before the agency; or the court may set aside or modify the decision . . . if it determines that the substantial rights of any party may have been prejudiced . . . .”  G. L. c. 30A, § 14.  See Attorney Gen. v. Commissioner of Ins., 450 Mass. 311, 318 (2008).  Under this standard, when an agency’s decision is based on an error of law, a reviewing court may choose to leave in place the overall disposition of a case, but on different grounds than those relied upon by the agency.  Because the hearing officer’s findings, supported by substantial evidence, were that Franklin’s agents knew or should have known that the shingles could contain asbestos, the agency’s disposition in this case is affirmed, on grounds different that those relied on by the DEP.

Conclusion.  The judgment of the Superior Court is vacated and set aside, and the matter is remanded to the Superior Court, where judgment shall enter for the DEP.

So ordered.

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