ATTORNEYS FOR APPELLANT ATTORNEY FOR APPELLEE
Karen Freeman-Wilson Kenneth D. Reed
Attorney General of Indiana Hammond, Indiana
John B. Laramore
Deputy Attorney General
SUPREME COURT OF INDIANA
INDIANA DEPARTMENT OF )
ENVIRONMENTAL MANAGEMENT, et. al. )
Appellants (Defendants Below ),) 56S05-9905-CV-298
) in the Supreme Court
v. ) ) 56A05-9805-CV-243
MEDICAL DISPOSAL SERVICES, INC. ) in the Court of Appeals
Appellee (Plaintiff Below ). )
APPEAL FROM THE NEWTON CIRCUIT COURT
The Honorable Robert Smart, Judge
Cause No. 56C01-9708-MI-6
May 24, 2000
SHEPARD, Chief Justice.
In 1994, Medical Disposal Services, Inc. (MDSI), sought declaratory judgment that its operations
were not subject to the Indiana Department of Environmental Management's (IDEM) permit requirement
for solid waste transfer stations. Though MDSI won a preliminary injunction prohibiting
any IDEM enforcement action, it ultimately lost on the merits. It did
persuade the trial court, however, that IDEM could not impose any sanction for
violations that occurred while the injunction was in effect. We reverse.
Relevant Facts and Procedural Posture
The relevant facts in this case are largely undisputed. They were set
forth by the Court of Appeals in the previous appeal:
The undisputed facts reveal that Medical Disposal is an Illinois corporation duly admitted
to do business in Indiana. Since 1989, Medical Disposal has collected and
transported medical waste from Indiana to a medical waste facility in Grand Rapids,
Michigan where the waste is disposed of by incineration. Medical Disposal operates
small delivery trucks which retrieve medical waste from numerous health care providers and
health care facilities in northwest Indiana. These trucks then transport the contained
waste to a central site, leased by Medical Disposal, located at the IMK
Truckstop in Hammond, Indiana. There, the containers are removed from the smaller
trucks and loaded into the larger tractor trailers which then haul the waste
to the incinerator facility in Michigan.
In March 1994, the IDEM notified Medical Disposal that an inspection of the
IMK Truckstop revealed that by transferring medical waste, Medical Disposal was operating a
solid waste transfer station without acquiring a solid waste processing permit in violation
of Indiana law. The IDEM ordered Medical Disposal to cease the transfer
of the medical waste until a valid permit was obtained.
In May 1994, Medical Disposal filed a complaint for a declaratory judgment, alleging
that it was not in violation of the Indiana Environmental Management Act or
any State solid waste regulations as its transport of medical waste did not
include the transfer of solid waste and thus, was not subject to the
Medical Disposal Services, Inc. v. Indiana Dept. of Envtl. Management, 669 N.E.2d 1054,
1056 (Ind. Ct. App. 1996), trans. denied. Pending resolution of the lawsuit,
MDSI sought and obtained a temporary restraining order, and then a preliminary injunction,
prohibiting IDEM from interfering with the operation of the facility. In its
answer to the complaint, IDEM counterclaimed for civil penalties for MDSI's alleged violations.
The trial court ultimately granted summary judgment in favor of IDEM, determining that
MDSI had illegally operated a disposal facility for which a permit was required.
The court ordered MDSI to cease all operations at the IMK Truckstop
within five days and remain closed until it obtained all the proper permits.
MDSI complied with the order and closed the IMK facility. The
court did not reach the issue of civil penalties.
On appeal, the Court of Appeals affirmed the summary judgment for IDEM, stating:
[W]e determine that the trial court did not err in finding that by
transferring infectious waste at the IMK Truckstop, Medical Disposal was transporting solid waste
and operating a solid waste processing facility without the required permit in violation
of Indiana law.
Medical Disposal Services, 669 N.E.2d at 1060. This Court denied transfer.
Medical Disposal Services, Inc. v. Indiana Dept. of Envtl. Management, 683 N.E.2d 589
On remand, the trial court set a hearing to address the issue of
civil penalties. After a change of venue, MDSI moved for summary judgment,
requesting that the trial court prohibit IDEM from imposing any penalties during the
period of preliminary injunction. IDEM also moved for partial summary judgment, asking
the court to determine as a matter of law that MDSI had earned
over $400,000 in profit during the preliminary injunction period, and that those profits
were the direct result of its illegal operations. IDEM asked the trial
court to order MDSI to remit these allegedly ill-gotten gains as one component
of an appropriate civil penalty. IDEM now asserts that it actually "did
not ask for summary judgment on civil penalties, believing that additional factual matters
had to be adduced at trial before penalties could be assessed." (Appellant's
Br. at 3-4.)
The trial court granted MDSI's motion and denied IDEM's motion. As summarized
by the Court of Appeals:
[T]he trial court found that penalties would not be imposed because 1) the
law governing the legality of the Hammond transfer station was not "totally clear,"
and 2) a reasonable person could interpret the preliminary injunction "to the effect
that there would be no fine levied for acts occurring while the Order
was in effect." (R. [at] 679-80). Accordingly, the trial court ruled that
"IDEM is foreclosed from assessing any type of civil penalty during the period
wherein the Preliminary Injunction was in effect." (R. [at] 680).
Indiana Dept. of Envtl. Management v. Medical Disposal Services, Inc., 700 N.E.2d 501,
502 (Ind. Ct. App. 1998) (footnote omitted). IDEM appealed, and the Court of
Appeals affirmed. This appeal ensued. We grant IDEMs petition to transfer.
Summary Judgment Standard of Review
A grant of summary judgment requires that the evidence show no genuine issue
of material fact exists and the moving party is entitled to judgment as
a matter of law. Ind. Trial Rule 56(C). On appeal from
summary judgment, the reviewing appellate court faces the same issues that were before
the trial court, and analyzes them in the same way. Ambassador Fin.
Services Inc. v. Ind. Nat'l Bank, 605 N.E.2d 746 (Ind. 1993). Although
the nonmovant has the burden of demonstrating the grant of summary judgment was
erroneous, we carefully assess the trial court's decision to ensure that the nonmovant
was not improperly denied its day in court. Colonial Penn Ins. Co.
v. Guzorek, 690 N.E.2d 664 (Ind. 1997).
Civil Penalties Not Barred
IDEM asserts that the trial court wrongly granted summary judgment for MDSI on
remand because civil penalties are both authorized and appropriate in this instance.
MDSI counters that summary judgment was correctly granted because the governing law was
unclear and the penalty grossly excessive.
In the first phase of this case, the trial court and the Court
of Appeals concluded that MDSI had violated the permit requirements for solid waste
disposal facilities. See Medical Disposal Services, 669 N.E.2d at 1058-59. Accordingly,
the issue of culpability has been decided against MDSI. The only remaining
issue in this transaction is whether IDEM may impose civil fines for the
period the preliminary injunction was in effect. We hold that it can.
The Indiana Code authorizes IDEMs commissioner to issue administrative orders imposing civil penalties.
The commissioner may also initiate a court action to recover civil penalties.
For violations such as MDSI's, the Code allows the commissioner to assess
civil penalties of up to twenty-five thousand dollars per day of violation.
IDEM's power, of course, is not without check. Subject to the applicable standards
of administrative review, "[t]he judiciary has authority to control the administrative process and
temper an agency's power to assess penalties." Indiana Dept. of Envtl. Management,
700 N.E.2d at 502-03 (citing Louis J. Jaffe, Judicial Control of Administrative Action,
318-19 (1965)). Furthermore, the Court of Appeals correctly pointed out the now-settled
doctrine that a trial courts entry of a preliminary injunction will not prevent
a regulatory body from imposing penalties for the willful violation of a rule
or regulation during the period of the injunction. Id. at 502 n.3
(citing Indiana High School Athletic Assn v. Carlberg, 694 N.E.2d 222, 227, 242-43
If the Indiana Code authorizes IDEM to impose penalties, and the preliminary injunction
does not insulate MDSI from penalties, then how could the trial court and
the Court of Appeals both rule in favor of MDSI?
In ruling that IDEM would be prohibited from imposing civil penalties in the
present case, the trial court relied in part on the notion that the
law governing the legality of the Hammond transfer station was not "totally clear."
(R. at 678-79.) To demonstrate that point, the court noted that
the Court of Appeals had to resort to rules of statutory construction to
interpret the statute's language.
MDSI also devotes several pages in its brief pointing out the vagueness that
existed within the law, and the uncertainty regarding its applicability to MDSI's operations.
(Appellee's Br. at 15-23.) Both the trial court and Court of Appeals
have already held, however, that the law was clear enough to inform MDSI
that it needed a permit, and that failure to acquire such a permit
was a violation of state law. Medical Disposal Services, 669 N.E.2d at
1060 ("Medical Disposal was transporting solid waste and operating a solid waste processing
facility without the required permit in violation of Indiana law. . . .
[T]he trial court's grant of summary judgment in favor of IDEM was proper.").
Slightly recast, MDSI's argument becomes: the court found the law clear enough to
hold us guilty, but should find it too vague to impose any penalty
upon us. We think IDEM is correct in its characterization that MDSI
is "still trying to fight the last war in its effort to convince
this Court that the law was so vague that it could not serve
as the basis for civil penalties." (Appellant's Reply Br. at 4-5.)
MDSI lost that war below, and we decline to restage it here.
The trial court and Court of Appeals also relied heavily on the fact
that the Indiana General Assembly has since amended the Code to exclude specifically
the type of facility which had been run by MDSI.
subsequent legalization of MDSI's activities, however, did not relieve MDSI of the obligation
it faced at the time. As a general rule, the law in
place at the time an action is commenced governs. "Unless a contrary
intention is expressed, statutes are treated as intended to operate prospectively, and not
retrospectively." Chadwick v. City of Crawfordsville, 216 Ind. 399, 413-14, 24 N.E.2d
937, 944 (1940).
What Penalty Is Proper?
Each of the arguments offered by MDSI actually speak to an issue different
from IDEM's power to assess civil penalties. MDSI asserts that the governing
laws were in a state of flux which, by IDEM's own admission, necessitated
"clarification." Moreover, argues MDSI, the legislature later legalized these exact activities.
MDSI also points to its exemplary behavior at all stages of these proceedings,
including the fact that "[t]he minute Judge Smart entered his decision deciding that
infectious waste was included in the definition of solid waste, MDSI halted operations
in Hammond." (Appellee's Br. at 13-14.)
According to MDSI, "[t]hese aren't
the kind of people who should be billy-clubbed with a monstrous assessment of
civil penalties just because they disagreed with mighty IDEM."
(Id. at 14.)
Finally, MDSI maintains that the civil penalties sought by IDEM here are
so outlandish as to violate the United States and Indiana Constitutions' prohibitions against
excessive fines. See U.S. Const. amend. VIII; Ind. Const. art. I, §
None of these arguments abrogate IDEM's statutory power to assess civil penalties against
violators, but might well be properly considered in determining an appropriate penalty.
IDEM's "clarification" of the law and the General Assembly's subsequent legalization of the
activity might be considered mitigating in determining the amount MDSI must pay, but
do not mean that MDSI may not be fined at all. Whether
the actual fines imposed by IDEM are appropriate is a factual matter that
must be addressed at the trial court. As IDEM itself points out:
[O]n remand, the amount of civil penalties is a matter for the trial
judge's discretion. Many of the factors Medical Disposal raises in its brief,
including its asserted good faith, could be considered by the trial court in
a discretionary determination of the proper penalty. The trial court might also
give weight to Medical Disposal's argument that lenity is appropriate where new legal
ground is being explored, Brief of Appellee at 17-21. But that doctrine
does not, by itself, preclude penalties altogether in this case.
(Appellant's Reply Br. at 5.) The remainder of this action must be
spent figuring out the appropriate penalty, at which time MDSI's arguments about being
"billy-clubbed" for "minor violations" when in fact "Medical Disposal at all times acted
in absolute good faith," (Appellees Br. at 14, 25), can be heard
in full. The trial court can also hear full argument on whether
IDEM may use displacement of profits or "leveling the playing field among competitors"
as reasons for imposing the maximum penalty allowed. The court can also
weigh the parties' evidence on the seriousness of the environmental threat posed by
the IMK facility.
The trial court is the proper venue for resolution
of these factual matters.
The stated purpose of the Environmental Management Act is "to preserve, protect, and
enhance the quality of the environment so that, to the extent possible, future
generations will be ensured clean air, clean water, and a healthful environment."
See Ind. Code Ann. § 13-12-3-1(3) (West 1998) (formerly Ind. Code § 13-7-1-1-(a)).
The penalty assessed on remand should reflect those principles and the relative
gravity of the infraction.
We reverse the summary judgment for MDSI, and remand to the trial court
for proceedings on the amount of the penalty to be assessed.
Dickson, Sullivan, Rucker, and Boehm, JJ., concur.
Whether a declaratory judgment action is an appropriate vehicle for raising such
issues was never addressed on appeal.
See Ind. Code Ann. § 13-14-2-7, -30-3-4(b)(2)(B)(ii), -30-3-11 (West 1998) (formerly Ind.
Code § 13-7-5-8, -11-2, -11-5). Title 13 of the Indiana Code was
recodified in 1996. Because the analysis would not change, we cite to
the statutes currently in effect throughout this opinion, with references to the citations
in place when the action was originally filed.
See Ind. Code Ann. § 13-14-2-6, -30-4-1(b) (West 1998) (formerly Ind. Code
§ 13-7-5-7, -7-13-1(a)).
See Ind. Code Ann. § 13-30-4-1(a) (West 1998) (formerly Ind. Code §
Our opinion on this topic is actually
Indiana High School Athletic Assn
v. Reyes, 694 N.E.2d 249 (Ind. 1997).
The court stated:
That the statutes in force at all times relevant herein regarding "infectious waste"
and "solid waste" were not totally clear as to whether or not "infectious
waste" came within the purview of the statute governing "solid waste" as evidenced
by the fact that the Indiana Court of Appeals was required to apply
the rules of statutory construction and interpret these statutes for the benefit of
the people of Indiana.
(R. at 678-79.)
When the orginal Summary Judgment was argued, MDSI pointed out to Judge Smart
that IDEM was in the process of amending its Regulation so as to
specifically name "infectious" waste as a "solid" waste. MDSI suggested that this
meant that infectious waste had never been included before within the definition of
solid waste. IDEM disagreed, and successfully maintained that its effort at amending
its Regulation was purely for the purposes of "clarification", and not a change
in meaning. Judge Smart recognized this "clarification" purpose in his original Summary
Judgment, and the Court of Appeals concurred in its decision of August 26,
1996. MDSI respectfully submits that it was a close question, in any
event, and further that if one is to be subjected to heavy-duty fines
and penalties for violating a Statute or a Regulation, then the Statute or
Regulation should be crystal clear, even to a lay-person, and not ambiguous, and
certainly not in need of "clarification."
(Appellee's Br. at 13 (emphasis omitted).)
In 1997, the General Assembly amended the definition of "transfer station" to
exclude a facility where:
(A) infectious waste . . . is transferred directly between two (2) vehicles;
(B) infectious waste is packaged in compliance with [applicable regulations]; and
(C) packages of infectious waste are not opened at any time during the
Pub. L. No. 128-1997 § 2; Ind. Code Ann. § 13-11-2-235 (West 1998).
In prohibiting IDEM from assessing any penalties against MDSI, the trial court noted:
[T]he [previously mentioned ambiguity in the law] is further evidenced by the recent
amendment to the statute defining solid waste and the Court now takes judicial
notice of said amendment.
(R. at 679.) The Court of Appeals went even further in its
reliance on the new statute, likening it to a change in criminal penal
statutes justifying the use of the doctrine of amelioration.
Indiana Dept. of
Envtl. Management, 700 N.E.2d at 503-04. By virtue of our grant of
transfer, that opinion is vacated. Ind. Appellate Rule 11(B)(3).
With regard to MDSI's compliance with the trial court's order, as evidence
of its good faith at all stages of the proceedings, (Appellee's Br. at
12), we observe that MDSI did not have the option not to comply.
Compliance with a cease and desist order entitles it to only the
most modest mitigation.
This sort of hyperbolic and accusatory language characterize MDSIs briefs. (See, e.g.,
Appellee's Br. in Oppn to Trans. at 1, 2, 7, 8, 9, 10.)
For its inappropriate tone and lack of respect for the opposing party,
we strike MDSI's Brief in Opposition to Transfer. See Shirk v. Hupp,
167 Ind. 509, 79 N.E. 490 (1906) ("For discourteous and unprofessional language in
a brief . . . , the brief may be stricken from the
files . . . .").
The parties offer conflicting accounts of infectious waste strewn upon the ground,
and accessibility of the site to the general public. (Appellant's Br. at
8; Appellee's Br. at 9.)