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State ex rel. DeWine v. Osborne Co., Ltd.

Court of Appeals of Ohio, Eleventh District, Lake

October 23, 2017

OSBORNE CO., LTD., et al., Defendants-Appellants.

         Civil Appeal from the Lake County Court of Common Pleas, Case No. 2014 CV 000166.

          Mike DeWine, Ohio Attorney General; Gregg H. Bachmann, Nicole Candelora-Norman, and Amy Factor, Assistant Attorneys General, (For Plaintiff-Appellee).

          Richard N. Selby, II, Dworken & Bernstein Co., (For Defendants-Appellants).


          TIMOTHY P. CANNON, J.

         {¶1} Appellants, Osborne Co., Ltd. and the Executors of the Estate of Jerome T. Osborne, appeal from an August 1, 2016 judgment of the Lake County Court of Common Pleas. The trial court ordered appellants to pay a civil penalty for violating Ohio Revised Code Chapter 6111 and ordered injunctive relief in favor of appellee, State of Ohio ex rel. Michael DeWine, Ohio Attorney General. This judgment is affirmed in part and reversed in part for the reasons that follow.

         {¶2} On May 29, 2012, appellee filed a complaint, in Case No. 12 CV 001459, against Defendants Jerome T. Osborne ("Mr. Osborne") and Osborne, Inc. Appellee subsequently filed an amended complaint, which substituted Osborne Co., Ltd. ("Osborne Co.") for Osborne, Inc. The trial court denied a motion for partial summary judgment filed by appellee on January 17, 2014. On January 22, 2014, Osborne Co. was voluntarily dismissed from Case No. 12 CV 001459, and appellee filed a complaint against Osborne Co. in Case No. 14 CV 00166. The trial court consolidated the two cases on January 30, 2014. On August 15, 2014, the trial court granted a motion to substitute the Executors of Jerome T. Osborne's Estate as defendants, following Mr. Osborne's death. The executors are identified as Richard M. Osborne, Sr.; Georgeanne Osborne Gorman; Michael E. Osborne; Jacqueline Osborne Fisher; William V. Krug; Jerome T. Osborne, III; William L. Mackey; and Jeremy Cash Osborne.

         {¶3} The complaints against each appellant-Osborne Co. and Mr. Osborne's estate-set forth three causes of action, each alleging violations of Ohio's Water Pollution Control Laws as found in Revised Code Chapter 6111.

         {¶4} Count One alleges appellants violated R.C. 6111.04(A) and R.C. 6111.07(A) by failing to obtain a certification from the Ohio Environmental Protection Agency ("Ohio EPA") under Section 401 of the Clean Water Act or a Section 404 permit from the U.S. Army Corps of Engineers before engaging in certain activities within and along the East Branch Chagrin River that resulted in "(1) the placement of dredged or fill material and/or wastes into waters of the State; and (2) degradation of certain portions of the East Branch Chagrin River and the threatened degradation of other portions [of] these waters of the state."

         {¶5} Count Two alleges appellants violated R.C. 6111.04(A) and R.C. 6111.07(A) by failing to obtain a construction storm water discharge permit before engaging in construction activities that resulted in "disturbing one or more acres of land within and along two miles of stream channel of the East Branch Chagrin River."

         {¶6} Count Three alleges appellants violated R.C. 6111.04(A) and R.C. 6111.07(A) because they polluted the East Branch Chagrin River, without a permit, by discharging storm water from land within and along two miles of stream channel of the East Branch Chagrin River, and thereby created a public nuisance.

         {¶7} The parties submitted a joint stipulation of facts with regard to many issues in the case. With regard to remaining disputed facts, the matter ultimately proceeded to a bench trial in January 2016.

         {¶8} This case arose after an employee of the Ohio EPA observed William Franz, an employee of Osborne Co., operating a track hoe in the middle of the East Branch Chagrin River. In his deposition, Mr. Franz testified that he was removing silt so the river would flow. The parties stipulated that Mr. Osborne instructed Mr. Franz to use the track hoe to remove sand and gravel from the stream bed and relocate this material along the edge of the stream, on the stream banks, and in the middle of the river. The parties also stipulated that, on certain occasions when the track hoe's bucket could not reach the river bank, Mr. Franz would place piles in the river, then relocate the track hoe and move those piles to the bank of the river. Another stipulation was that Mr. Osborne personally observed some of Mr. Franz's work and that he would usually call Mr. Franz the night before or first thing in the morning and tell him what project to work on each day and what to do for the project. After work was completed, Mr. Osborne would usually call Mr. Franz to ask how the work for the day went.

         {¶9} The parties stipulated that appellants were performing the work on the river pursuant to agreements with the Village of Kirtland Hills, reached in 1983 and 1990, to maintain the river banks. In exchange for the work performed on the river, Mr. Osborne was allowed to farm certain property owned by the Village of Kirtland Hills. The work was done throughout the years from River Mile 4.30 to River Mile 6.15.[1] Most of the work performed in or near the river was on property owned either by the Village of Kirtland Hills or Mr. Osborne.

         {¶10} The parties stipulated that the East Branch Chagrin River is a "water of the state, " as that term is defined in R.C. 6111.01; that it was designated as a State Scenic River by the Ohio Department of Natural Resources ("ODNR") on July 2, 1979; that it is designated as an Outstanding State Water for Ecological Value; and that its beneficial use designations are cold water habitat, [2] seasonal salmonid habitat, primary contact recreation, and agricultural/industrial water supply.

         {¶11} The parties stipulated that Mr. Franz, at the direction of Mr. Osborne, operated the track hoe in the river on 24 separate occasions from 2001 through 2007. Each of these occasions involved dredging the river and placing dredged material along the river bank or in the middle of the river. Evidence was introduced at trial that the dredged material formed nine piles, anywhere from eight- to twenty-feet high, for extended distances along the river bank. At least 25, 656 cubic yards of river bottom were dredged. Most of the dredged material was piled on property owned by either the Village of Kirtland Hills or Mr. Osborne. One pile, referred to as "the Oliva pile, " was located on private property near St. Hubert's church.

         {¶12} According to trial testimony, the river had been excavated down to the bedrock in many areas between R.M. 4.30 and R.M. 6.15, which resulted in the river losing access to its floodplain and caused significant bank erosion. The state also introduced testimony that appellants' activities resulted in a loss or degradation of the habitat for fish and macro invertebrates.

         {¶13} Paul Anderson, an environmental specialist in the surface water division of the Ohio EPA, became aware of the work being done in the river on July 13, 2007, at which time it ordered appellants to cease work in the river. Appellants complied. The Ohio EPA immediately performed a site survey and concluded the site was severely impacted by substrate removal and reworking and by placement of removed material in the floodplain and bankfull area:[3] the habitat was severely simplified, siltation was high, and erosion was potentially high.

         {¶14} The U.S. Army Corps of Engineers thoroughly inspected the river one week later. The parties stipulated that Mr. Osborne received a letter from the Corps in August 2007, stating the work in the river was an unauthorized activity and in violation of the Federal Clean Water Act. The letter stated, in part:

The inspection found that gravel and natural stone were excessively dredged from the stream at several locations, and disposed or stockpiled in the floodway and below the ordinary high water elevation, and also in the stream channel. No Department of the Army authorization was issued for this activity. Therefore, this work is an unauthorized activity and in violation of the Clean Water Act.

         The letter directed Mr. Osborne not to perform any additional activities in the river and advised that any further work would be considered a knowing and willful violation of federal law, subjecting him to civil penalties.

         {¶15} The parties stipulated that Mr. Osborne also received a notice of violation from the Ohio EPA in August 2007, alleging violations of Ohio Revised Code Chapter 6111. The notice also alleged violations of O.A.C. 3745-1-04. This notice stated, in part:

The illegal activity began upstream of St. Hubert's Church on the East Branch of the Chagrin River and continued downstream approximately 8, 700 feet. The inspection team observed that materials had been and were being side cast from the river bed onto various sections of the river bank. This activity constitutes a violation of [R.C.] 6111.04, which prohibits any person from causing pollution to any waters of the State without a valid unexpired permit issued by the Director of Ohio EPA. [R.C.] 6111.07 states that no person shall violate or fail to perform any duty imposed by rules adopted by Ohio EPA. The activities observed caused violations of [O.A.C] 3745-1-04, which contains criteria applicable to all waters of the State. Please be advised that failure to comply with the above laws may be cause for enforcement action pursuant to [R.C.] Section 6111 and subject you to civil penalties identified in [R.C.] 6111.09(A).
Please inform this office in writing, within ten days of receipt of this notification, of the description of the action(s) proposed to address these violations. Please provide all documentation associated with this activity including the intent of the activity, contracts with others to perform the activity, and a record of when this activity had been previously performed.

         {¶16} Mr. Osborne responded by letter, through his attorney, on September 10, 2007. Mr. Osborne noted he began utilizing the land located in Kirtland Hills pursuant to an oral agreement in the late 1970s; this oral agreement was confirmed by written agreements in 1983 and 1990. Pursuant to these agreements, Mr. Osborne undertook erosion control and bank stabilization measures on the property on an intermittent basis. He indicated there were no records or documentation associated with said erosion control and bank stabilization measures. The letter ended by stating, "Mr. Osborne proposes no actions at this time to address the alleged violations" and that nothing in the letter shall be deemed an admission as to any unlawful activities; "in fact, for the record, Mr. Osborne denies any unlawful activities[.]"

         {¶17} On November 1, 2007, Randall Keitz, a floodplain engineer with ODNR, surveyed the disturbed area of the river. He testified that he concluded, as a result of this survey, that the river was highly unstable with considerable ongoing erosion of the river banks due to the limited channel width and increased velocity of the water. Trees along the banks were being undermined, and access to the floodplain was very limited.

         {¶18} On November 2, 2007, the U.S. Army Corps of Engineers sent a letter to the director of the Ohio EPA, noting the work was done without authorization and in violation of the Clean Water Act. It authorized the Ohio EPA to immediately begin remedial and restoration measures without needing to obtain any further approval or permits from the Corps.

         {¶19} Over the next two years, the Ohio EPA met with appellants and the Village of Kirtland Hills to negotiate remediation of the river. On April 29, 2009, the Ohio EPA provided a proposed draft of a settlement, titled "Director's Final Findings and Orders, " to appellants in an attempt to administratively settle the violations of R.C. Chapter 6111. The draft states, in Paragraph 3 of the Findings, that appellants altered approximately two miles of the stream channel in violation of R.C. Chapter 6111 and the Clean Water Act by dredging from and depositing fill material in the river. Paragraph 8 states that constriction of the floodplain remains a significant concern; lowering of the stream channel elevation and stockpiling of material along the stream banks significantly limits the amount of energy dissipation that can occur during flood events. Paragraphs 9 and 10 state that placement of dredged substrates directly upon the stream bank has increased the risk of flood damage, and lowering of the channel bed has caused bank erosion problems. Paragraph 11 states the river is not meeting certain biocriteria outlined in O.A.C. 3745-1-07 due to habitat modification and disturbance.

         {¶20} The draft then outlines several Orders directing appellants to implement a plan designed to fully remediate the river. It states that "[t]he Plan shall focus on facilitating the natural recovery of the river. Where appropriate, the plan may include replacement of the stockpiled substrates within the stream channel to provide enhanced habitat, to expedite the stream channel recovery process or to stabilize streambanks at specified locations."

         {¶21} A section of the draft, titled "Reservation of Rights, " provides, in part:

Ohio EPA reserves the right to take any action, including but not limited to any enforcement action for civil or administrative penalties against Respondent for violations specifically cited in these Orders, action to recover costs, or action to recover damages to natural resources, action to compel further remediation pursuant to any available legal authority as a result of past, present, or future violations of state or federal laws or regulations or the common law, and/or as a result of events or conditions arising from, or related to, the Site. Upon termination pursuant to the Termination Section of these Orders, Respondent shall have resolved their liability to Ohio EPA only for the Work performed pursuant to these Orders.

         {¶22} Larry Reeder, enforcement supervisor of the surface water division at the Ohio EPA, testified that it did not intend to pursue a civil penalty against appellants at the time they were negotiating. Cynthia Paschke also testified regarding these negotiations. Ms. Paschke was qualified as an expert witness, limited to the collection and analysis of habitat data in the river, and she also represented appellants during their negotiations with the Ohio EPA. Ms. Paschke testified that appellants were prepared to move forward with the negotiated restoration project had the Ohio EPA waived its reservation of rights regarding future administrative and civil penalties, as it had done with the Village of Kirtland Hills. The Ohio EPA did not waive its reservation of rights, and Mr. Reeder testified he was notified in May 2009 that appellants would not sign the ...

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